-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, S3tCArWOny+EoVFVOGWlb4MmJ8UcqzXZntiEFu3swlNOw1kgscV614wsrOwtO3Lu fuPe5NP7hthH2eouSp9gmA== 0000897101-95-000129.txt : 19950517 0000897101-95-000129.hdr.sgml : 19950516 ACCESSION NUMBER: 0000897101-95-000129 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST BANK SYSTEM INC CENTRAL INDEX KEY: 0000036104 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 410255900 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06880 FILM NUMBER: 95537677 BUSINESS ADDRESS: STREET 1: 601 SECOND AVE S STREET 2: FIRST BANK PL CITY: MINNEAPOLIS STATE: MN ZIP: 55402-4302 BUSINESS PHONE: 6129731111 FORMER COMPANY: FORMER CONFORMED NAME: FIRST BANK STOCK CORP DATE OF NAME CHANGE: 19720317 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM (NOT APPLICABLE) COMMISSION FILE NUMBER 1-6880 FIRST BANK SYSTEM, INC. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) 41-0255900 (I.R.S. Employer Identification No.) FIRST BANK PLACE, 601 SECOND AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55402-4302 (Address of principal executive offices and Zip Code) 612-973-1111 (Registrant's telephone number, including area code) (NOT APPLICABLE) (Former name, former address and former fiscal year, if changed since last report). Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. Class Outstanding as of April 30, 1995 Common Stock, $1.25 Par Value 135,567,431 shares Total # of pages: 27 Exhibit Index appears on page 1. FINANCIAL SUMMARY
MARCH 31 MARCH 31 (DOLLARS in millions, except per share amounts) 1995 1994 THREE MONTHS ENDED Income from continuing operations $133.8 $111.9 Discontinued operations -- (1.2) Net income $133.8 $110.7 PER COMMON SHARE Income from continuing operations $.97 $.80 Discontinued operations -- (.01) Net income $.97 $.79 Dividends paid $.3625 $.29 Common shareholders' equity 19.58 19.49 RETURN ON AVERAGE ASSETS Income from continuing operations 1.66 % 1.41 % Discontinued operations -- (.01) Return on average assets 1.66% 1.40% RETURN ON AVERAGE COMMON EQUITY Income from continuing operations 21.1% 17.2 % Discontinued operations -- (.2) Return on average common equity 21.1% 17.0 % Net interest margin (taxable-equivalent basis) 5.05% 4.75% Efficiency ratio 55.7 58.5
MARCH 31 DECEMBER 31 1995 1994 PERIOD END Loans $25,215 $24,556 Allowance for credit losses 470 475 Assets 32,712 34,128 Total shareholders' equity 2,757 2,612 Common equity to total assets 8.1% 7.3% Tier 1 capital ratio 7.7 7.3
TABLE OF CONTENTS AND FORM 10-Q CROSS-REFERENCE INDEX
PART I -- FINANCIAL INFORMATION Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 2) 2 Financial Statements (Item 1): Consolidated Balance Sheet 13 Consolidated Statement of Income 14 Consolidated Statement of Shareholders' Equity 15 Consolidated Statement of Cash Flows 16 Notes to Consolidated Financial Statements 17 Selected Statistical Information: Consolidated Daily Average Balance Sheet and Related Yields and Rates 23 PART II -- OTHER INFORMATION Submission of Matters to a Vote of Security Holders (Item 4) 24 Exhibits and Reports on Form 8-K (Item 6) 24 Signature 25 Exhibit 11 -- Computation of Primary and Fully Diluted Net Income Per Common Share 26 Exhibit 12 -- Computation of Ratio of Earnings to Fixed Charges 27
MANAGEMENT'S DISCUSSION AND ANALYSIS Earnings Summary First Bank System, Inc. (the "Company") reported first quarter 1995 operating earnings of $133.8 million, an increase of $21.9 million, or 19.6 percent, from the first quarter of 1994. On a per share basis, operating earnings were $.97 in the first quarter of 1995, compared with $.80 in the first quarter of 1994, an increase of 21.3 percent. Reported net income for the first quarters of 1995 and 1994 was $133.8 million and $110.7 million, or $.97 and $.79 per share, respectively. Return on average assets and return on average common equity in the first quarter of 1995 were 1.66 percent and 21.1 percent, respectively, compared with returns of 1.41 percent and 17.2 percent from continuing operations in the first quarter of 1994. The net interest margin on a taxable-equivalent basis increased 30 basis points from the first quarter of 1994, to 5.05 percent. The efficiency ratio, the ratio of expenses to revenues, was 55.7 percent, an improvement of 282 basis points from 58.5 percent in the first quarter of 1994. The strong quarterly improvement in net income resulted from loan and fee income growth, ongoing expense control, continued improvement in credit quality and effective capital management. During the first quarter of 1995, net interest income on a taxable-equivalent basis increased $27.3 million, or 8.0 percent, and noninterest income increased $18.2 million, or 11.3 percent, as compared with the first quarter of 1994. The provision for credit losses was essentially unchanged from that of the first quarter of 1994. Noninterest expense for the quarter increased only 3.8 percent over last year, despite the addition of expenses associated with several acquisitions. These included Boulevard Bancorp, Inc. ("Boulevard") and Rocky Mountain Financial Corporation ("Rocky Mountain"), which were both acquired on March 25, 1994, and the corporate trust business of J.P. Morgan, acquired on September 2, 1994. All were accounted for as purchases. Compared with noninterest expense for the first quarter of 1994, adjusted to include the operations of Boulevard, Rocky Mountain and the acquired corporate trust business, on a pro forma basis, noninterest expense for the current quarter declined by $20.4 million, or 6.3 percent. Nonperforming assets declined $16.6 million, or 7.1 percent, from December 31, 1994, to a level of $215.7 million at March 31, 1995. The ratio of the allowance for credit losses to nonperforming loans at quarter-end was 318 percent compared with 283 percent at the end of 1994. ACQUISITIONS On January 24, 1995, the Company issued approximately 21.7 million shares to complete its merger with Metropolitan Financial Corporation ("MFC"). At December 31, 1994, MFC had $7.9 billion in assets, $5.5 billion in deposits, and 211 offices, principally in North Dakota, Minnesota, Nebraska, Iowa, Kansas, South Dakota, Wisconsin, and Wyoming. Results for 1994 have been restated to reflect this pooling of interests. Because of regulatory restrictions on nonbanking activities, the Company expects to sell Edina Realty, Inc., MFC's real estate brokerage subsidiary, within two years. Accordingly, the operations of Edina Realty are accounted for as discontinued operations in the accompanying financial statements. TABLE 1. Summary of Consolidated Income
THREE MONTHS ENDED (Taxable-equivalent basis; MARCH 31 MARCH 31 Dollars in millions, except per share data) 1995 1994 Interest income $629.1 $518.3 Interest expense 262.3 178.8 Net interest income 366.8 339.5 Provision for credit losses 26.0 26.6 Net interest income after provision for credit losses 340.8 312.9 Noninterest income 179.6 161.4 Noninterest expense 304.3 293.1 Income from continuing operations before income taxes 216.1 181.2 Taxable-equivalent adjustment 3.5 3.7 Income taxes 78.8 65.6 Income from continuing operations 133.8 111.9 Loss from discontinued operations -- (1.2) Net income $133.8 $110.7 Return on average assets 1.66% 1.40% Return on average common equity 21.1 17.0 Net interest margin 5.05 4.75 Efficiency ratio 55.7 58.5 Per share: Income from continuing operations $0.97 $0.80 Loss from discontinued operations -- (0.01) Net income $0.97 $0.79 Common dividends paid $0.3625 $0.29
TABLE 2. Line of Business Financial Performance
TRUST AND RETAIL & COMMUNITY COMMERCIAL INVESTMENT CONSOLIDATED BANKING PAYMENT SYSTEMS BANKING GROUP COMPANY THREE MONTHS ENDED MARCH 31, (Dollars in Millions) 1995 1994 1995 1994 1995 1994 1995 1994 1995 1994 CONDENSED INCOME STATEMENT: Net interest income (taxable-equivalent basis) $259.7 $232.7 $41.1 $46.6 $57.7 $54.3 $ 8.3 $ 5.9 $366.8 $339.5 Provision for credit losses 3.3 9.6 20.3 14.5 2.4 2.5 -- -- 26.0 26.6 Noninterest income 53.8 62.1 58.4 41.2 18.0 15.3 49.4 42.8 179.6 161.4 Noninterest expense 192.2 194.9 47.8 40.5 24.1 23.3 40.2 34.4 304.3 293.1 Income taxes and taxable-equivalent adjustment 44.9 34.4 12.0 12.6 18.7 16.8 6.7 5.5 82.3 69.3 Income from continuing operations $ 73.1 $ 55.9 $19.4 $20.2 $30.5 $27.0 $10.8 $ 8.8 133.8 111.9 Loss from discontinued operations -- (1.2) Net income $133.8 $110.7 AVERAGE BALANCE SHEET DATA: Commercial loans $5,584 $4,932 $ 643 $ 391 $4,794 $5,141 $ -- $ -- $11,021 $10,464 Consumer loans 11,277 10,856 2,294 1,736 -- -- -- -- 13,571 12,592 Assets 22,141 22,369 3,661 2,671 6,055 6,391 845 728 32,702 32,159 Deposits 20,854 21,199 32 22 1,768 2,729 921 961 23,575 24,911 Common equity 1,524 1,604 340 288 424 463 243 142 2,531 2,497 Return on average assets* 1.34% 1.01% 2.15% 3.07% 2.04% 1.71% ** ** 1.66% 1.41% Return on average common equity* 19.5 14.1 23.1 28.4 29.2 23.7 18.0% 25.1% 21.1 17.2 Efficiency ratio 61.3 66.1 48.0 46.1 31.8 33.5 69.7 70.6 55.7 58.5
* From continuing operations **Not meaningful Note: Preferred dividends are not allocated to the business lines. In February 1995, the Company entered into agreements to sell deposits of approximately $960 million and incidental assets associated with 63 former MFC branch locations. These dispositions are expected to close in the second and third quarters of 1995. This portion of MFC's branch network was not part of MFC's core business and was used primarily as a funding source. In 1994, the 63 branches contributed approximately 2 percent of total loans originated and 2.5 percent of noninterest income generated by MFC. The incidental assets, consisting primarily of deposit-related loans and premises and equipment, represent less than 1 percent of MFC's total assets. The operations of these branches were not material to MFC in 1994. The $960 million of deposits will be replaced with other sources of funding. On March 16, 1995, the Company completed the acquisition of First Western Corporation ("FWC"), a $317 million bank holding company based in Sioux Falls, South Dakota. FWC owned Western Bank, which had nine branches in and around Sioux Falls, South Dakota. The transaction was accounted for as a purchase. Line of Business Financial Review Each of the Company's four business lines--Retail and Community Banking, Payment Systems, Commercial Banking, and the Trust and Investment Group--contributed to the strong financial performance in the first quarter of 1995. Business line results are derived from the Company's business unit profitability reporting system. Designations, assignments, and allocations may change from time to time as management accounting systems are enhanced or product lines change. During 1995 certain methodologies changed and 1994 results are presented on a consistent basis. RETAIL AND COMMUNITY BANKING - Retail and Community Banking, which includes consumer, small business and middle market banking services and residential mortgage lending, achieved strong revenue growth while containing costs. Net income increased 30.8 percent to $73.1 million in the first quarter of 1995 compared with the first quarter of 1994. Return on assets increased to 1.34 percent from 1.01 percent, and return on equity increased to 19.5 percent from 14.1 percent. The increase in net interest income is attributable to strong home equity loan growth and aggressive small- and middle-market business lending. Noninterest income was down over the prior year quarter primarily due to reduced residential mortgage activity resulting from higher market interest rates. The decrease in the provision for credit losses reflects continuing improvement in credit quality. Noninterest expense improved slightly despite the acquisition of Boulevard and Rocky Mountain on March 25, 1994, reflecting the benefits of integrating recent business combinations including MFC which was integrated within one month of completing the transaction. The efficiency ratio improved to 61.3 percent in the first quarter of 1995 compared with 66.1 percent in the first quarter of 1994. PAYMENT SYSTEMS - Payment Systems includes consumer credit card, corporate and purchasing card services, card-accessed secured and unsecured lines of credit, ATM processing, and merchant processing. This business line reported net earnings of $19.4 million in the first quarter of 1995, down slightly from first quarter of 1994. Return on assets was 2.15 percent compared with 3.07 percent in the first quarter of 1994. Return on equity was 23.1 percent compared with 28.4 percent for the same quarter in the previous year. Net interest income decreased due to lower interest rates earned on retail credit cards, consistent with recent rate competitiveness in the industry, and increased Corporate Card activity. The increase in fee-based noninterest income is attributable to growth in the sales volume of the Corporate Card, the Purchasing Card, the Northwest Airlines WorldPerks credit card, and merchant processing. The increase in the provision for credit losses reflects growth in the loan portfolio and a significant increase in sales volume. Noninterest expense increased due to the initial investment expenses associated with the expanded automated teller machines ("ATM") network. Net earnings from this business line are expected to be stronger in the remaining quarters of 1995 as the ATM network's transaction volume increases and the seasonal retail credit card activity increases. Payment Systems continues to be cost effective as measured by its efficiency ratios of 48.0 percent in the first quarter of 1995 and 46.1 percent in the first quarter of 1994. Excluding initial investment expenses incurred with the ATM network the efficiency ratio was essentially flat year over year. COMMERCIAL BANKING - Commercial Banking, which provides lending, treasury management, and other financial services to middle market, large corporate and mortgage banking companies, contributed net earnings of $30.5 million in the first quarter of 1995, a 13.0 percent increase over the first quarter of 1994. Return on assets rose to 2.04 percent in the first quarter of 1995 from 1.71 percent in the same quarter a year ago. The earnings increase reflects continuing strong performance in both net interest income and noninterest income as well as ongoing credit quality and expense control. Commercial Banking's average loans, excluding loans to mortgage banking companies, increased $655 million, or 18.2 percent, from the first quarter of 1994. The decline in deposits relates to less activity in the mortgage banking sector. The efficiency ratio improved to 31.8 percent in the first quarter of 1995 compared with 33.5 percent in the first quarter of 1994. TRUST AND INVESTMENT GROUP - The Trust and Investment Group, which includes personal, institutional and corporate trust services, investment management services, and a full-service brokerage company, reported an earnings increase of 22.7 percent in the first quarter of 1995 compared with the first quarter of 1994. The return on average common equity was 18.0 percent in the first quarter of 1995 and 25.1 percent in the first quarter of the prior year. The current quarter's net earnings increased over the first quarter of 1994 primarily due to recent acquisitions, including J.P. Morgan and Boulevard. Stronger noninterest income is due to growth in Corporate Trust and investment sales and management fees as well as recent acquisitions. Although the recent acquisitions have improved net earnings, the return on equity reflects increased investment in recent acquisitions. The efficiency ratio was 69.7 percent in the first quarter compared with 70.6 percent in the first quarter of 1994, reflecting the effective integration of acquisitions and revenue growth. TABLE 3. Analysis of Net Interest Income
THREE MONTHS ENDED MARCH 31 MARCH 31 (Dollars in millions) 1995 1994 Net interest income (taxable-equivalent basis) $366.8 $339.5 Average balances of earning assets supported by: Interest-bearing liabilities $23,534 $21,897 Noninterest-bearing liabilities 5,932 7,073 Total earning assets $29,466 $28,970 Average yields and weighted average rates (taxable-equivalent basis): Earning assets yield 8.66% 7.26% Rate paid on interest-bearing liabilities 4.52 3.31 Gross interest margin 4.14% 3.95% Net interest margin 5.05% 4.75% Net interest margin without taxable-equivalent increments 5.00% 4.70%
Income Statement Analysis NET INTEREST INCOME - Net interest income on a taxable-equivalent basis was $366.8 million in the first quarter of 1995, an increase of $27.3 million, or 8.0 percent, from the first quarter of 1994. The improvement in net interest income reflects increases in average loan yields and average loan balances. The average yield on loans in the first quarter was 9.06 percent, or 139 basis points higher than the yield of 7.67 percent in the first quarter of last year, reflecting increases in the Company's average reference rate during 1994 and the increasing proportion of higher-yielding consumer loans. The effect of the increase in average yields on loans more than offset the impact of higher rates paid on interest-bearing liabilities; the average of these rates was 4.52 percent in the first quarter, or 121 basis points higher than for the same period of 1994. Average loans totaled $24.6 billion in the first quarter of 1995, an increase of $1.5 billion, or 6.7 percent, reflecting growth in both nonmortgage consumer and commercial loans (including loans acquired with Boulevard and Rocky Mountain) partially offset by decreases in the balance of loans to mortgage bankers and residential mortgage loans. Excluding these mortgage-related balances and the effect of Boulevard and Rocky Mountain loans, average loans for the quarter increased $2.3 billion, or 14.4 percent, over the same quarter in 1994, reflecting strong growth in small business and middle market loans, credit cards, and home equity loans. The decline in nonperforming assets also contributed to the growth in net interest income. The net interest margin on a taxable-equivalent basis was 5.05 percent in the first quarter of 1995, an increase of 30 basis points from 4.75 percent in the first quarter of 1994. The increase in the net interest margin from a year ago results from both a shift in the mix of earning assets from lower margin securities and residential mortgage-related loan balances to higher yielding consumer and commercial loans, and a widening of the spread between earning assets and interest-bearing liabilities that repriced during the period. PROVISION FOR CREDIT LOSSES - The provision for credit losses was $26.0 million in the first quarter of 1995, essentially unchanged from the level in the first quarter of 1994. Total net charge-offs of $32.1 million also were essentially unchanged from the total of $31.3 million for the same quarter a year ago. The allowance for credit losses was $470.4 million at March 31, 1995, down slightly from $474.7 million at December 31, 1994. Reserve coverage remains strong as the ratio of the allowance for credit losses to nonperforming loans increased to 318 percent at quarter-end compared with 283 percent at the end of 1994. NONINTEREST INCOME - Noninterest income in the first quarter of 1995 was $179.6 million, an increase of $18.2 million, or 11.3 percent, from the first quarter last year, reflecting growth in credit card and trust fees. Credit card fees increased $15.6 million, or 43.3 percent, from the prior year quarter, reflecting higher sales volumes for Corporate Card, Purchasing Card, and the Northwest Airlines WorldPerks credit card. Trust fees were up over the first quarter of 1994 by $3.2 million, or 8.3 percent, reflecting growth in corporate trust fees, including fees attributable to the September 1994 J.P. Morgan corporate trust unit acquisition. Insurance commissions were higher this quarter because of increased commission income on annuity sales. NONINTEREST EXPENSE - Noninterest expense was $304.3 million in the first quarter of 1995, an increase of $11.2 million, or 3.8 percent, from first quarter of 1994. The increase reflects the addition of Boulevard, Rocky Mountain and the J.P. Morgan corporate trust acquisition. Compared with noninterest expense for the first quarter of 1994, adjusted to include the expenses of these acquisitions on a pro forma basis, noninterest expense for the first quarter of 1995 declined by $20.4 million, or 6.3 percent. This decline reflects the benefits of integrating recent business combinations, including MFC which was integrated within one month of closing the transaction. The Company's efficiency ratio, the measure of expenses to revenues, improved to 55.7 percent for the quarter from 58.5 percent for the same quarter a year ago. TABLE 4. Noninterest Income
THREE MONTHS ENDED MARCH 31 MARCH 31 (Dollars in millions) 1995 1994 Credit card fees $51.6 $36.0 Trust fees 41.7 38.5 Service charges on deposit accounts 32.1 32.2 Insurance commissions 6.3 5.8 Trading account profits and commissions 3.2 2.7 Other 44.7 46.2 Total noninterest income $179.6 $161.4
TABLE 5. Noninterest Expense
THREE MONTHS ENDED MARCH 31 MARCH 31 (Dollars in millions, except per employee data) 1995 1994 Salaries $112.1 $106.5 Employee benefits 28.5 27.3 Total personnel expense 140.6 133.8 Net occupancy 25.7 25.5 Furniture and equipment 23.5 21.4 Amortization of goodwill and other intangible assets 14.1 10.7 FDIC insurance 13.6 14.6 Advertising 6.3 9.5 Other personnel costs 7.6 8.6 Professional services 6.6 7.5 Data processing 4.3 4.9 Printing, stationery and supplies 4.8 5.7 Postage 5.9 5.8 Telephone 5.8 6.2 Other real estate -- 0.9 Other 45.5 38.0 Total noninterest expense $304.3 $293.1 Efficiency ratio* 55.7% 58.5% Quarterly average number of employees (full-time equivalents) 13,874 14,406 Annualized personnel expense per employee $40,536 $37,151
*Computed as noninterest expense divided by the sum of net interest income on a taxable-equivalent basis and noninterest income net of securities gains and losses. Total salaries and benefits expense for the first quarter of 1995 increased $6.8 million, or 5.1 percent, from the first quarter of 1994, primarily due to acquisitions in 1994. Average full-time equivalent employees decreased by 10.3 percent, to 13,874 in the first quarter of 1995, compared with 15,459 (including the employees of Boulevard, Rocky Mountain and the J.P Morgan trust business, on a pro forma basis) for the first quarter of 1994. The increase in net occupancy and furniture and equipment expense for the current quarter, compared with the first quarter of 1994, also was the result of acquisitions. Advertising expense decreased $3.2 million, or 33.7 percent, over the 1994 level, reflecting efficiencies realized from the overlap of MFC's and the Company's geographic markets. Compared with the same period of 1994, amortization of goodwill and intangibles expense for the first quarter increased by $3.4 million, or 31.8 percent, due to recent acquisitions. PROVISION FOR INCOME TAXES - The provision for income taxes was $78.8 million in the first quarter of 1995, compared with $65.6 million in the first quarter of 1994. The increase primarily results from a higher level of taxable income. At March 31, 1995, the Company's net deferred tax asset was $312.8 million, compared with $363.0 million at December 31, 1994. For further information regarding income taxes, refer to Note H on page 20. Balance Sheet Analysis LOANS - On an aggregate basis, the Company's loan portfolio increased $659 million, or 2.7 percent, to $25.2 billion at March 31, 1995, from $24.6 billion at December 31, 1994. An increase of $942 million primarily in the commercial, automobile, and home equity and second mortgage portfolios was offset by a $283 million decrease in loans to mortgage bankers and residential mortgages. Commercial. The Company's portfolio of commercial loans totaled $7.8 billion at March 31, 1995, up $828 million from December 31, 1994. The increase over prior quarter reflects growth in small business and middle-market business lending and in the Payment Systems balances associated with corporate and purchasing cards. Financial Institutions. The portfolio of loans to financial institutions totaled $.6 billion at March 31, 1995, a decrease of $228 million from the $.8 billion balance at December 31, 1994. The decrease from December 31, 1994, is attributable to cyclical activity in the Company's secured loans to mortgage banking firms. The mortgage banking firms' loan volume decreased due to a decline in refinancing activity in response to a rise in market interest rates. Commercial Real Estate. The Company's portfolio of commercial real estate mortgages and construction loans grew approximately $51 million during the first quarter of 1995, to $2.8 billion at March 31, 1995. The Company is seeing increased activity in commercial real estate loans as market prices stabilize and vacant space declines, allowing more projects to meet the Company's stringent credit standards. Highly Leveraged Transactions. The Company's exposure to commercial loans involving the buyout, recapitalization or acquisition of an existing business, called highly leveraged transactions ("HLTs"), remains at relatively low levels. At March 31, 1995, the Company had HLT outstandings totaling $348 million and was committed under definitive agreements to lend an additional amount of approximately $202 million. This exposure increased from December 31, 1994, when outstandings were $283 million and additional commitments were $179 million. The increase in HLT originations is consistent with industry and economic trends. The Company continues to have vigorous underwriting criteria and monitoring procedures for HLT lending. Consumer. Total consumer loan outstandings were $13.6 billion at March 31, 1995, essentially unchanged from December 31, 1994. A $159 million increase, primarily in home equity and second mortgages and automobile loans, was offset by a $216 million decrease in residential mortgage loans, residential mortgage loans held for sale, and credit card loans. Home equity and second mortgages increased primarily due to successful promotions, and automobile loans increased due to growth in indirect auto loans. The reduction in residential mortgage loans is the result of management's decision to focus on other consumer loan products. Residential mortgage loans held for sale declined primarily due to fewer housing starts and refinancings as a result of rising market interest rates. The decrease in credit cards reflects seasonal fluctuations. ALLOWANCE FOR CREDIT LOSSES - At March 31, 1995, the allowance for credit losses was $470.4 million, compared with an allowance of $474.7 million at December 31, 1994. The ratio of the allowance for credit losses to nonperforming loans increased to 318 percent at March 31, 1995, from 283 percent at December 31, 1994. For further information on the allowance for credit losses, refer to "Credit Management" on page 9. SECURITIES - At March 31, 1995, securities were $3.5 billion compared with $5.2 billion at December 31, 1994, reflecting the sale of $1.56 billion of securities in connection with the Company's interest rate risk management process. Trading and other short-term earning assets were $344 million at March 31, 1995, compared with $576 million at December 31, 1994. The decrease is primarily the result of the decline in federal funds sold and resale agreements to $253 million at March 31, 1995, from $471 million at December 31, 1994. DEPOSITS - Noninterest-bearing deposits were $5.3 billion at March 31, 1995, down $.6 billion from December 31, 1994. The decrease in noninterest-bearing deposits results from reduced loan production at mortgage banking firm customers which generate noninterest-bearing deposits. Interest-bearing deposits include certificates of deposit, savings certificates, money market accounts, other savings accounts, and interest checking products. These deposits were $18.1 billion at March 31, 1995, essentially unchanged from December 31, 1994. TABLE 6. Summary of Allowance for Credit Losses
THREE MONTHS ENDED MARCH 31 MARCH 31 (Dollars in millions) 1995 1994 Balance at beginning of period $474.7 $466.1 CHARGE-OFFS: Commercial: Commercial 4.6 11.4 Financial institutions -- -- Real estate: Commercial mortgage 7.5 9.8 Construction -- -- HLTs -- 3.1 Total commercial 12.1 24.3 Consumer: Residential mortgage 1.1 1.2 Credit card 23.0 16.7 Other 15.5 12.1 Total consumer 39.6 30.0 Total 51.7 54.3 RECOVERIES: Commercial: Commercial 7.8 9.6 Financial institutions 0.1 0.1 Real estate: Commercial mortgage 2.3 3.5 Construction -- 0.2 HLTs 2.4 4.0 Total commercial 12.6 17.4 Consumer: Residential mortgage 0.3 0.1 Credit card 2.7 2.2 Other 4.0 3.3 Total consumer 7.0 5.6 Total 19.6 23.0 NET CHARGE-OFFS: Commercial: Commercial (3.2) 1.8 Financial institutions (0.1) (0.1) Real estate: Commercial mortgage 5.2 6.3 Construction -- (0.2) HLTs (2.4) (0.9) Total commercial (0.5) 6.9 Consumer: Residential mortgage 0.8 1.1 Credit card 20.3 14.5 Other 11.5 8.8 Total consumer 32.6 24.4 Total 32.1 31.3 Provision charged to operating expense 26.0 26.6 Additions related to acquisitions 1.8 23.9 Balance at end of period $470.4 $485.3 Allowance as a percentage of period-end loans 1.87% 2.04% Allowance as a percentage of nonperforming loans 318 238 Allowance as a percentage of nonperforming assets 218 153
BORROWINGS - Short-term borrowings, which include federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings, were $2.9 billion at March 31, 1995, down from $3.5 billion at the end of 1994. The decrease is primarily due to repayment of approximately $400 million of securities sold under agreements to repurchase. Intermediate- and long-term debt declined to $2.5 billion at March 31, 1995, from $2.7 billion at December 31, 1994 due to maturities. TABLE 7. Nonperforming Assets
MARCH 31 DECEMBER 31 (Dollars in millions) 1995 1994 Nonaccrual loans $148.0 $167.8 Restructured loans 0.1 0.1 Nonperforming loans 148.1 167.9 Other real estate 63.7 64.0 Other nonperforming assets 3.9 0.4 Nonperforming assets $215.7 $232.3 Accruing loans 90 days or more past due $34.4 $26.0 Nonperforming loans to total loans 0.59 % 0.68 % Nonperforming assets to total loans plus other real estate 0.85 0.94
Credit Management The Company's credit management process includes central credit policy and administration functions and standard underwriting criteria for specialized lending categories, such as mortgage banking, real estate construction, and consumer credit. The Company's credit management process is supported by regular examinations conducted by the credit administration function. Quarterly, management reviews large loans and all loans experiencing deterioration of credit quality. A standard credit scoring system is used to assess consumer credit risks and to price consumer products relative to their assigned risk rating. In evaluating credit risk, the Company takes into consideration the composition of its loan portfolio; its level of allowance coverage; macroeconomic concerns, such as the level of debt outstanding in the public and private sectors, the effects of domestic and international economic conditions, and regional economic conditions; and other issues. The Company's primary operating region includes Minnesota, Colorado, Montana, North Dakota, South Dakota, Wisconsin, Iowa, Kansas, Nebraska, Wyoming, and Illinois. Approximately 80 percent of the loan portfolio consists of extensions of credit to customers in the Company's primary operating region. ANALYSIS OF NET LOAN CHARGE-OFFS - Net loan charge-offs totaled $32.1 million in the first quarter of 1995, essentially unchanged from the first quarter of 1994. Commercial loan net recoveries for the quarter were $.5 million, compared with net charge-offs of $6.9 million in the first quarter of 1994, reflecting continued improvement in the credit quality of this portfolio. Consumer loan net charge-offs increased $8.2 million, or 33.6 percent, from the first quarter of 1994, commensurate with the growth in the balance of nonmortgage consumer loans and sales volume activity in credit card products over the past year. ANALYSIS OF NONPERFORMING ASSETS - Nonperforming assets include all nonaccrual, impaired, and restructured loans, other real estate and other nonperforming assets owned by the Company. At March 31, 1995, nonperforming assets totaled $215.7 million, down $16.6 million, or 7.1 percent, from December 31, 1994. The ratio of nonperforming assets to loans and other real estate improved to .85 percent at March 31, 1995, from .94 percent at December 31, 1994. Significant decreases occurred in the categories of nonperforming HLT and commercial loans, primarily as the result of loan repayments. TABLE 8. Nonperforming Assets by Industry
MARCH 31 DECEMBER 31 (Dollars in millions) 1995 1994 COMMERCIAL: Commercial $19.9 $26.6 Real estate: Commercial mortgage 69.1 71.0 Construction 2.5 1.6 HLTs 1.8 9.9 Total commercial 93.3 109.1 CONSUMER: Residential mortgage 41.9 43.5 Credit card 10.2 9.9 Other 2.7 5.4 Total consumer 54.8 58.8 Total nonperforming loans 148.1 167.9 OTHER REAL ESTATE 63.7 64.0 OTHER NONPERFORMING ASSETS 3.9 0.4 Total nonperforming assets $215.7 $232.3
TABLE 9. Interest Rate Swap Hedging Portfolio Notional Balances and Yields by Maturity Date
At March 31, 1995 (Dollars in millions) WEIGHTED WEIGHTED AVERAGE AVERAGE Receive Fixed Swaps* NOTIONAL INTEREST RATE INTEREST RATE Maturity Date AMOUNT RECEIVED PAID 1995 (remaining nine months) $345 7.79% 6.27% 1996 433 7.96 6.13 1997 275 6.42 6.15 1998 406 5.93 6.18 1999 575 6.88 6.27 After 1999** 675 6.89 6.23 Total $2,709 6.98% 6.21%
* At March 31, 1995, the Company does not have any swaps in its portfolio which requires it to pay fixed-rate interest. **At March 31, 1995, all swaps with a maturity after 1999 hedge fixed-rate subordinated notes. Interest Rate Risk Management The Company's principal objective for interest rate risk management is to control the exposure of net interest income to risks associated with interest rate movements. The Company uses derivative financial instruments ("derivatives") to hedge on-balance sheet items and, to a lesser extent, in connection with intermediated transactions for customers. The market risk on intermediated transactions is limited by entering into generally matching or offsetting positions. The Company does not enter into derivative contracts for speculative purposes. Interest rate risk is measured and reported to the Company's Asset and Liability Management Committee ("ALCO") through the use of traditional gap analysis which measures the difference between assets and liabilities that reprice in a given time period, simulation modeling which produces projections of net interest income under various interest rate scenarios and balance sheet strategies, and valuation modeling which measures the economic value of various components of the balance sheet under various interest rate scenarios. The significant assumptions used in these analyses include rate sensitivities, prepayment risks, and the timing of changes in prime and deposit rates compared with changes in money market rates. Including the effect of interest rate swaps, futures, options and other hedging instruments, the Company had a cumulative positive repricing gap position at one year of $102 million at March 31, 1995, indicating that more assets than liabilities reprice within that period. While this analysis is useful as a point-in-time measurement of interest rate risk, there are certain risks that the repricing gap position does not capture, such as basis risk, prepayment risk, and other option risks. Due to these limitations, management places a greater reliance on simulation and valuation modeling to measure and manage interest rate risk. The Company's policy is to maintain a low interest rate risk position by limiting the amount of forecasted net interest income at risk over a 12-month period assuming an immediate and sustained 100-basis point change in interest rates. The Company invests in fixed rate assets or receives the fixed rate payment on interest rate swaps as a hedge to maintain acceptable interest rate risk levels. The derivatives the Company uses to achieve its hedging objectives are primarily interest rate swaps, caps, and floors. As of March 31, 1995, the Company received payments on $2.7 billion notional amount of interest rate swap agreements, based on fixed interest rates, and made payments based on variable interest rates. These swaps had an average fixed rate of 6.98 percent and an average variable rate, which is tied to various LIBOR rates, of 6.21 percent. The maturity of these agreements ranged from one month to 9.6 years with an average remaining maturity of 3.9 years. Swaps contributed to the Company's net interest margin by reducing interest expense $4.5 million and $25.6 million for the quarters ended March 31, 1995, and 1994, respectively. Interest rate caps and floors are used similarly by the Company to minimize the impact of fluctuating interest rates on earnings. The total notional amount of cap agreements purchased as of March 31, 1995, was $200 million with a strike level of 3-month LIBOR at 6.00 percent. The premium on caps is amortized over the life of the cap. The impact of caps on interest income was not material for the quarters ended March 31, 1995, or March 31, 1994. The total notional amount of floor agreements purchased as of March 31, 1995, was $950 million with an average strike level of 3-month LIBOR at 3.50 percent and an average remaining maturity of 2.7 years. Floors did not materially affect interest income for the quarters ended March 31, 1995, or March 31, 1994. TABLE 10. Capital Ratios
MARCH 31 DECEMBER 31 (Dollars in millions) 1995 1994 Common equity $2,651 $2,494 As a percent of assets 8.1% 7.3% Tangible common equity* $2,225 $2,082 As a percent of assets 6.9% 6.2% Total shareholders' equity $2,757 $2,612 As a percent of assets 8.4% 7.7% Tier 1 capital $2,219 $2,052 As a percent of risk-adjusted assets 7.7% 7.3% Total risk-based capital $3,405 $3,227 As a percent of risk-adjusted assets 11.8% 11.4% Leverage ratio 6.9 6.2
*Defined as common equity less goodwill Forward contracts, totaling $200 million at March 31, 1995, hedged the interest rate risk of the fixed rate mortgage loans originated and held for sale by the Company's mortgage subsidiary. The Company enters into foreign currency commitments primarily as an intermediary for customers. The Company manages its credit risk on derivative contracts through counterparty and credit limit approvals and monitoring credit concentration risks. Refer to Note I on page 21 for further information on interest rate swaps and options. Liquidity Management The objective of liquidity management is to ensure the continuous availability of funds to meet the demands of depositors, investors and borrowers. ALCO is responsible for managing these needs while achieving the Company's financial objectives. ALCO meets regularly to review funding capacity, current and forecasted loan demand and investment opportunities. With this information, ALCO supervises funding needs, excess funding positions and maintenance of contingent funding sources to achieve a balance sheet structure that provides sufficient liquidity. Capital Management The ratio of common equity to assets increased 80 basis points from December 31, 1994, to 8.1 percent at March 31, 1995. Common equity per share was $19.58 at March 31, 1995, compared with $18.63 at December 31, 1994. Total equity to assets was 8.4 percent at March 31, 1995, up from 7.7 percent at December 31, 1994. The increases are primarily due to earnings retention and improvement in the market value of available-for-sale securities. Tier 1 and total risk-based capital ratios were 7.7 percent and 11.8 percent on March 31, 1995, compared with 7.3 percent and 11.4 percent at December 31, 1994, respectively. The leverage ratio, the measure of Tier 1 capital to total quarterly average assets, also increased to 6.9 percent from 6.2 percent at the end of 1994. On January 18, 1995, and February 15, 1995, the Board of Directors authorized repurchase programs of two million and 14 million shares of common stock, respectively. The two million share authorization is intended to provide shares for stock purchase and option plans and for the purchase acquisition of First Western Corporation. One million shares were repurchased and subsequently reissued in the first quarter for these purposes. The 14 million share authorization is intended to allow the Company to buy back shares in connection with the future excess capital retention expected over the next two years and is predicated upon such excess capital, as well as for stock purchase and option plans. No shares have been repurchased under this authorization at March 31, 1995. Accounting Changes Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards No. ("SFAS") 114, "Accounting by Creditors for Impairment of a Loan." This Statement requires creditors to establish a valuation allowance when it is probable that all the principal and interest due under the contractual terms of a loan will not be collected. The impairment is measured based on the present value of expected future cash flows based on the effective interest rate of the loan, or the observable market price or the fair value of a collateral dependent loan. This differs from the Company's prior policy in that it requires the establishment of a valuation allowance for uncollectible interest in addition to the principal amounts of impaired loans. The Statement also requires the reclassification of in-substance foreclosures from other real estate to nonperforming loans for all periods if the Company has not taken possession of the collateral. The adoption of SFAS 114 did not have a material effect on the Company. The Financial Accounting Standards Board recently issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The impairment is measured based on the present value of expected future cash flows from the use of the asset and its eventual disposition. If the expected future cash flows are less than the carrying amount of the asset, an impairment loss is recognized based on current fair values. The Statement is effective for fiscal years ending after December 15, 1995. The adoption of SFAS 121 is not expected to have a material effect on the Company. CONSOLIDATED BALANCE SHEET
MARCH 31 DECEMBER 31 (In millions, except shares) 1995 1994 ASSETS Cash and due from banks $ 1,598 $ 1,707 Federal funds sold 26 135 Securities purchased under agreements to resell 227 336 Trading account securities 90 77 Available-for-sale securities 3,535 5,185 Loans 25,215 24,556 Less allowance for credit losses 470 475 Net loans 24,745 24,081 Bank premises and equipment 475 479 Interest receivable 185 198 Customers' liability on acceptances 189 178 Other assets 1,642 1,752 Total assets $ 32,712 $ 34,128 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $ 5,346 $ 5,933 Interest-bearing 18,131 18,323 Total deposits 23,477 24,256 Federal funds purchased 1,839 1,630 Securities sold under agreements to repurchase 440 938 Other short-term funds borrowed 650 955 Long-term debt 2,542 2,684 Acceptances outstanding 189 178 Other liabilities 818 875 Total liabilities 29,955 31,516 Shareholders' equity: Preferred stock 106 118 Common stock, par value $1.25 a share-authorized 200,000,000 shares; issued: 3/31/95 - 135,424,331 shares; 12/31/94 - 134,599,409 shares 169 168 Capital surplus 868 866 Retained earnings 1,671 1,593 Unrealized loss on securities, net of tax (57) (106) Less cost of common stock in treasury: 3/31/95 - 2,976 shares; 12/31/94 - 767,000 shares -- (27) Total shareholders' equity 2,757 2,612 Total liabilities and shareholders' equity $ 32,712 $ 34,128
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31 MARCH 31 (In millions, except per share data) 1995 1994 INTEREST INCOME Loans $547.2 $433.7 Securities: Taxable 66.5 71.2 Exempt from federal income taxes 2.8 3.0 Other interest income 9.1 6.7 Total interest income 625.6 514.6 INTEREST EXPENSE Deposits 178.4 136.9 Federal funds purchased and repurchase agreements 30.9 9.7 Other short-term funds borrowed 10.1 6.3 Long-term debt 42.9 25.9 Total interest expense 262.3 178.8 Net interest income 363.3 335.8 Provision for credit losses 26.0 26.6 Net interest income after provision for credit losses 337.3 309.2 NONINTEREST INCOME Credit card fees 51.6 36.0 Trust fees 41.7 38.5 Service charges on deposit accounts 32.1 32.2 Insurance commissions 6.3 5.8 Other 47.9 48.9 Total noninterest income 179.6 161.4 NONINTEREST EXPENSE Salaries 112.1 106.5 Employee benefits 28.5 27.3 Net occupancy 25.7 25.5 Furniture and equipment 23.5 21.4 Amortization of goodwill and other intangible assets 14.1 10.7 FDIC insurance 13.6 14.6 Advertising 6.3 9.5 Other personnel costs 7.6 8.6 Professional services 6.6 7.5 Data processing 4.3 4.9 Other real estate -- 0.9 Other 62.0 55.7 Total noninterest expense 304.3 293.1 Income from continuing operations before income taxes 212.6 177.5 Applicable income taxes 78.8 65.6 Income from continuing operations 133.8 111.9 Loss from discontinued operations -- (1.2) Net income $133.8 $110.7 Net income applicable to common equity $131.9 $104.8 EARNINGS PER COMMON SHARE Average common and common equivalent shares 135,545,733 132,349,979 Income from continuing operations $.97 $.80 Loss from discontinued operations -- $(.01) Net income $.97 $.79
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
UNREALIZED GAINS/(LOSSES) COMMON ON SHARES PREFERRED COMMON CAPITAL RETAINED SECURITIES, TREASURY (In millions, except shares) OUTSTANDING* STOCK STOCK SURPLUS EARNINGS NET OF TAXES STOCK** TOTAL BALANCE DECEMBER 31, 1993 130,408,480 $278.1 $169.8 $852.2 $1,575.4 $ 38.0 $(169.4) $2,744.1 Net Income 110.7 110.7 Dividends declared: Preferred (5.9) (5.9) Common (38.1) (38.1) Purchase of treasury stock (860,812) (0.5) (8.6) (14.8) (23.9) Acquisition of Boulevard Bancorp, Inc. for common stock, warrants, and stock options 6,227,649 1.9 54.9 149.4 206.2 Other business acquisitions 526,000 (8.1) 16.2 8.1 Issuance of common stock: Dividend reinvestment 51,070 1.6 1.6 Stock option and stock purchase plans 283,692 0.1 2.7 (3.1) 3.8 3.5 Stock warrants exercised 23,437 0.1 0.1 Redemption of preferred stock (160.0) (7.0) (167.0) Change in unrealized gains/(losses) (57.4) (57.4) BALANCE MARCH 31, 1994 136,659,516 118.1 171.3 901.3 1,623.9 (19.4) (13.2) 2,782.0 BALANCE DECEMBER 31, 1994 133,832,409 $118.1 $168.3 $865.8 $1,592.8 $(106.4) $(26.7) $2,611.9 Net Income 133.8 133.8 Dividends declared: Preferred (1.9) (1.9) Common (48.6) (48.6) Purchase of treasury stock (1,040,475) (39.7) (39.7) Business acquisitions 1,619,998 0.3 4.3 52.4 57.0 Issuance of common stock: Dividend reinvestment 57,142 0.1 2.1 2.2 Stock option and stock purchase plans 926,355 0.7 (2.0) (3.7) 10.9 5.9 Stock warrants exercised 25,926 (0.7) 0.9 0.2 Redemption of preferred stock (12.2) (1.0) (13.2) Change in unrealized gains/(losses) 49.8 49.8 BALANCE MARCH 31, 1995 135,421,355 $105.9 $169.3 $868.2 $1,670.7 $ (56.6) $ (0.1) $2,757.4
* Defined as total common shares less common stock held in treasury. **Ending treasury shares were 2,976 at March 31, 1995; 767,000 at December 31, 1994; 398,337 at March 31, 1994; and 5,391,883 at December 31, 1993. CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31 MARCH 31 (In millions) 1995 1994 OPERATING ACTIVITIES Net income $133.8 $110.7 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 26.0 26.6 Depreciation and amortization of bank premises and equipment 19.6 17.8 Provision for deferred income taxes 22.3 14.7 Amortization of goodwill and other intangible assets 14.1 10.7 Amortization and write-downs of loan servicing related intangibles 3.4 9.3 Write-downs of other real estate 0.3 0.6 Changes in operating assets and liabilities, excluding the effects of purchase acquisitions: Increase in trading account securities (13.0) (5.2) (Increase) decrease in loans held for sale (24.2) 598.9 Decrease (increase) in accrued receivables 25.2 (30.3) Decrease in accrued liabilities (10.3) (58.9) Other - net 0.7 (16.0) Net cash provided by operating activities 197.9 678.9 INVESTING ACTIVITIES Net cash provided (used) by: Interest-bearing deposits with banks 28.9 31.7 Loans outstanding (445.6) 394.5 Securities purchased under agreements to resell 109.6 37.9 Available-for-sale securities: Sales 1,739.7 318.5 Maturities 172.0 539.5 Purchases (138.5) (722.1) Investment securities: Maturities -- 113.4 Purchases -- (233.4) Proceeds from sales/repayments of other real estate 10.5 22.2 Proceeds from sales of bank premises and equipment 1.8 2.1 Purchases of bank premises and equipment (16.3) (13.2) Purchases of loans (1.0) (467.0) Cash and cash equivalents of acquired subsidiaries 16.3 72.8 Business acquisitions, net of cash received -- (49.8) Other - net 1.0 8.4 Net cash provided by investing activities 1,478.4 55.5 FINANCING ACTIVITIES Net cash provided (used) by: Deposits (1,042.5) (1,600.1) Federal funds purchased and securities sold under agreements to repurchase (288.7) 1.1 Short-term borrowings (442.3) (63.8) Purchases of deposits -- 11.1 Long-term debt transactions: Proceeds -- 532.0 Principal payments (25.4) (196.8) Redemption of preferred stock (13.2) (0.9) Proceeds from dividend reinvestment, stock option, and stock purchase plans 8.1 5.1 Purchase of treasury stock (39.7) (23.9) Stock warrants exercised 0.2 0.1 Cash dividends (50.5) (44.0) Net cash used by financing activities (1,894.0) (1,380.1) Change in cash and cash equivalents (217.7) (645.7) Cash and cash equivalents at beginning of period 1,841.9 2,798.6 Cash and cash equivalents at end of period $1,624.2 $2,152.9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flow activity required under generally accepted accounting principles. In the opinion of management of the Company, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of results have been made and the Company believes such presentation is adequate to make the information presented not misleading. For further information, refer to the Company's Current Report on Form 8-K filed March 3, 1995, which includes a copy of the Company's restated consolidated financial statements and footnotes for the year ended December 31, 1994, which give effect to the acquisition of Metropolitan Financial Corporation, as discussed in Note C below. Certain amounts in prior periods have been reclassified to conform to the current presentation. NOTE B. Accounting Changes ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - In January 1995, the Company adopted Statement of Financial Accounting Standards No. ("SFAS") 114, "Accounting by Creditors for Impairment of a Loan." The adoption of this Statement, which did not have a material effect on the Company, requires creditors to establish a valuation allowance when it is probable that all the principal and interest due under the contractual terms of a loan will not be collected. The impairment is measured based on the present value of expected future cash flows based on the loan's effective interest rate, or the observable market price or the fair value of a collateral dependent loan. Accordingly, the Company established a valuation allowance for uncollectible interest in addition to the principal amounts of impaired loans. In addition, in-substance foreclosures, where the Company has not taken possession of the collateral, were reclassified from other real estate to nonperforming loans for all periods. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF - The Financial Accounting Standards Board recently issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The impairment is measured based on the present value of expected future cash flows from the use of the asset and its eventual disposition. If the expected future cash flows are less than the carrying amount of the asset, an impairment loss is recognized based on current fair values. The Statement is effective for fiscal years ending after December 15, 1995. The adoption of SFAS 121 is not expected to have a material effect on the Company. NOTE C. Business Combinations and Discontinued Operations METROPOLITAN FINANCIAL CORPORATION - Effective December 23, 1994, the Company received all regulatory approvals on the previously announced merger with Metropolitan Financial Corporation ("MFC"), a regional financial services holding company headquartered in Minneapolis, Minnesota. On January 24, 1995, the Company issued approximately 21.7 million shares to complete the transaction. As of December 31, 1994, MFC had approximately $7.9 billion in assets, $5.5 billion in deposits and 211 offices principally in North Dakota, Minnesota, Nebraska, Iowa, Kansas, South Dakota, Wisconsin, and Wyoming. The Company used the pooling of interests method to account for the transaction. Accordingly, the Company's financial statements have been restated for all periods prior to the merger to include the accounts and operations of MFC. The operations of Edina Realty, Inc., MFC's real estate brokerage subsidiary, are accounted for as discontinued operations because the Company expects to sell the subsidiary within two years to comply with regulations which restrict nonbanking activities. Operating results of the Company and MFC for the three months ended March 31, 1994, prior to restatement are:
THREE MONTHS ENDED (In millions) MARCH 31, 1994 The Company Net interest income $281.3 Net income 98.5 MFC Net interest income 54.5 Loss from discontinued operations (1.2) Net income 12.2 Combined Net interest income 335.8 Loss from discontinued operations (1.2) Net income 110.7
BOULEVARD BANCORP, INC. - On March 25, 1994, the Company completed the acquisition of Boulevard Bancorp, Inc. ("Boulevard"), a $1.6 billion commercial bank holding company headquartered in Chicago, Illinois, which was accounted for as a purchase. Under the terms of the purchase agreement, 6.2 million shares of the Company's common stock were issued and Boulevard's outstanding stock options and warrants were converted into stock options and warrants for the Company's common stock, at the same conversion rate. The Company bought back existing shares of its common stock approximately equal to the number of shares issued at the time of closing of the Boulevard acquisition. The results of operations of Boulevard are included in the Company's Consolidated Statement of Income since the date of acquisition. The following pro forma operating results of the Company assume that the Boulevard acquisition had occurred on January 1, 1994. In addition to combining the historical results of operations of the two companies, the pro forma results include adjustments for the estimated effect of purchase accounting on the Company's results, principally amortization of intangibles.
THREE MONTHS ENDED (In millions, except per-share amounts) MARCH 31, 1994 Net interest income $347.8 Loss from discontinued operations (1.2) Net income 94.6 Net income per share .64
The pro forma information may not be indicative of the results that actually would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. OTHER ACQUISITIONS - On March 16, 1995, the Company completed the acquisition of First Western Corporation, parent company of Western Bank, with $317 million in assets and nine branches in and around Sioux Falls, South Dakota. On March 25, 1994, the Company completed the acquisition of Rocky Mountain Financial Corporation, a $537 million savings bank holding company located in Cheyenne, Wyoming. Both of these acquisitions were accounted for as purchases. NOTE D. Securities The detail of the amortized cost and fair value of available-for-sale securities consisted of the following:
MARCH 31, 1995 DECEMBER 31, 1994 AMORTIZED FAIR AMORTIZED FAIR (In millions) COST VALUE COST VALUE U.S. Treasury $1,004 $971 $1,177 $1,113 Mortgage-backed securities 1,945 1,877 3,400 3,297 Other U.S. agencies 236 230 333 323 State and political 178 183 178 181 Other 263 274 269 271 Total $3,626 $3,535 $5,357 $5,185
NOTE E. Loans The composition of the loan portfolio was as follows:
MARCH 31 DECEMBER 31 (In millions) 1995 1994 COMMERCIAL: Commercial $7,830 $7,002 Financial institutions 559 787 Real estate: Commercial mortgage 2,461 2,454 Construction 374 330 HLTs 348 283 Total commercial loans 11,572 10,856 CONSUMER: Residential mortgage 5,060 5,098 Residential mortgage held for sale 180 197 Home equity and second mortgage 2,505 2,453 Credit card 2,248 2,409 Automobile 1,837 1,770 Revolving credit 737 725 Installment 699 712 Student loans held for sale 377 336 Total consumer loans 13,643 13,700 Total loans $25,215 $24,556
At March 31, 1995, the recorded investment in loans considered impaired under SFAS 114 was $93 million, which was included in nonaccrual loans. Of this amount, $3 million was measured using the present value of expected future cash flows, $82 million using the fair value of the loans' collateral, and $8 million was below the Company's threshold for valuing individual loans. The carrying value of the impaired loans was greater than or equal to the present value of expected future cash flows and, accordingly, no allowance for credit losses was specifically allocated to impaired loans. For the quarter ended March 31, 1995, the average recorded investment in impaired loans was approximately $101 million. No interest income was recognized on these impaired loans during the quarter. NOTE F. Long-Term Debt Long-term debt (debt with original maturities of more than one year) consisted of the following:
MARCH 31 DECEMBER 31 (In millions) 1995 1994 Floating-rate subordinated capital notes - due November 29, 1996 $150 $150 Fixed-rate 8.25% subordinated notes - due October 1, 1999 86 86 Fixed-rate 6.625% subordinated notes - due May 15, 2003 100 100 Fixed-rate 6.00% subordinated notes - due October 15, 2003 100 100 Fixed-rate 7.55% subordinated notes - due June 15, 2004 100 100 Fixed-rate 8.00% subordinated notes - due July 2, 2004 125 125 Fixed-rate 8.35% subordinated notes - due November 1, 2004 100 100 Step-up subordinated notes - due August 15, 2005 100 100 Floating-rate subordinated notes - due November 30, 2010 107 107 Federal Home Loan Bank advances 971 1,088 Medium-term notes (6.125% to 9.89%) - maturities to November 1997 492 514 Other 111 114 Total $2,542 $2,684
NOTE G. Shareholders' Equity On January 18, 1995, and February 15, 1995, the Board of Directors authorized repurchase programs of two million and 14 million shares of common stock, respectively. The two million share authorization is intended to provide shares for stock purchase and option plans and for the purchase acquisition of First Western Corporation. One million shares were repurchased and subsequently reissued in the first quarter for these purposes. The 14 million share authorization is intended to allow the Company to buy back shares in connection with the future excess capital retention expected over the next two years and is predicated upon such excess capital, as well as for stock purchase and option plans. No shares have been repurchased under this authorization at March 31, 1995. On January 19, 1994, the Board of Directors authorized the redemption of the 1989A and 1989B series of preferred stock. This redemption is reflected in the March 31, 1994, capital ratios. NOTE H. Income Taxes The components of income tax expense were:
THREE MONTHS ENDED MARCH 31 MARCH 31 (In millions) 1995 1994 FEDERAL: Current tax $52.8 $41.6 Deferred tax provision 18.3 13.9 Federal income tax 71.1 55.5 STATE: Current tax 3.7 9.3 Deferred tax provision 4.0 0.8 State income tax 7.7 10.1 Total income tax provision $78.8 $65.6
The reconciliation between income tax expense and the amount computed by applying the statutory federal income tax rate was as follows:
THREE MONTHS ENDED MARCH 31 MARCH 31 (In millions) 1995 1994 Tax at statutory rate (35%) $74.4 $62.1 State income tax, net of federal tax benefit 5.0 6.5 Tax effect of: Tax-exempt interest: Loans (1.3) (1.4) Securities (1.0) (1.0) Amortization of goodwill 3.4 1.9 Other items (1.7) (2.5) Applicable income taxes $78.8 $65.6
At March 31, 1995, the Company's net deferred tax asset was $312.8 million, compared with $363.0 million at December 31, 1994. NOTE I. Commitments, Contingent Liabilities and Off-Balance Sheet Financial Instruments The Company uses various financial instruments that have off-balance sheet risk in the normal course of business to meet the financing needs of its customers and to manage its interest rate risk. The contract or notional amounts of these financial instruments were as follows:
MARCH 31 DECEMBER 31 (In millions) 1995 1994 Commitments to extend credit: Commercial $6,507 $7,006 Corporate and purchasing cards 3,740 3,210 Consumer credit card 8,609 7,875 Other consumer 2,736 2,628 Letters of Credit: Standby 1,325 1,321 Commercial 164 175 Interest rate swap contracts: Hedge 2,709 2,674 Intermediated 127 127 Interest rate options contracts: Hedge interest rate floors purchased 950 950 Hedge interest rate caps purchased 200 250 Intermediated interest rate caps and floors purchased 121 127 Intermediated interest rate caps and floors written 121 127 Liquidity support guarantees and forward and option contracts 353 338 Foreign currency commitments: Commitments to purchase 1,062 941 Commitments to sell 1,062 941 Mortgages sold with recourse 306 312 Commitment to sell loans 780 935
The Company enters into interest rate swap contracts to hedge its balance sheet for risks caused by fluctuations in interest rates and as an intermediary for customers. Activity for the three months ending March 31, 1995, with respect to interest rate swaps which the Company uses to hedge medium-term notes, subordinated debt, deposit notes, long-term certificates of deposit, deposit accounts, and savings certificates was as follows:
(In millions) Notional amount outstanding at December 31, 1994 $2,674 Additions 150 Maturities 115 Notional amount outstanding at March 31, 1995 $2,709
For interest rate swaps designated as hedges, the weighted average interest rates to be paid were 6.21 percent and 6.09 percent at March 31, 1995, and December 31, 1994, respectively. At these same dates, the weighted average interest rates to be received were 6.98 percent and 6.91 percent. The Company is a receiver of fixed and payer of floating on all hedges as of March 31, 1995. The amortization of deferred gains and losses increased net interest income by $.4 million in the first quarter of 1995 and decreased net interest income by $.3 million in the first quarter of 1994. Net unamortized deferred gains and losses were $6.0 million at March 31, 1995. The Company will amortize these gains and losses through the year 2000. Interest rate floors totaling $950 million with an average remaining maturity of 2.7 years at March 31, 1995, and 3.0 years at December 31, 1994, hedged floating rate commercial loans. For interest rate floors designated as hedges, the strike rate ranged from 3.25 to 4.0 at March 31, 1995, and December 31, 1994. At March 31, 1995, the total notional amount of caps purchased was $200 million with a strike level of 3-month LIBOR at 6.00 percent. The total notional amount of caps purchased at December 31, 1994, was $250 million with an average strike level of 3-month LIBOR at 6.10 percent. NOTE J. Supplemental Information to the Consolidated Financial Statements CONSOLIDATED BALANCE SHEET - Time certificates of deposit in denominations of $100,000 or more totaled $1,240 million and $1,318 million at March 31, 1995, and December 31, 1994, respectively. CONSOLIDATED STATEMENT OF CASH FLOWS - Listed below are supplemental disclosures to the Consolidated Statement of Cash Flows.
THREE MONTHS ENDED MARCH 31 (In millions) 1995 1994 Income taxes paid $ 36.9 $ 10.7 Interest paid 244.0 185.0 Net noncash transfers to foreclosed property 8.8 8.8 Noncash transfer to other liabilities resulting from notification to shareholders of preferred stock redemption -- 166.1 Change in unrealized gain (loss) on available-for-sale securities, net of taxes of $30.8 in 1995 and $32.6 in 1994 49.8 (57.4) Cash acquisitions of businesses: Fair value of noncash assets acquired $ -- $ 529.0 Liabilities assumed -- (479.2) Net $ -- $ 49.8 Stock acquisitions of businesses: Fair value of noncash assets acquired $ 329.3 $ 1,674.0 Net cash acquired 16.3 72.8 Liabilities assumed (288.6) (1,540.6) Net value of common stock issued $ 57.0 $ 206.2
CONSOLIDATED DAILY AVERAGE BALANCE SHEET AND RELATED YIELDS AND RATES
1995 1994 % CHANGE INTEREST INTEREST AVERAGE YIELDS YIELDS BALANCE For the three months ended March 31 AND AND INCREASE (In millions) BALANCE INTEREST RATES BALANCE INTEREST RATES (DECREASE) ASSETS Securities: U.S. Treasury $ 1,065 $ 16.2 6.17% $ 1,676 $ 21.8 5.28% (36.5)% Mortgage-backed securities 2,464 41.6 6.85 2,759 41.9 6.16 (10.7) State & political subdivisions 175 4.6 10.66 193 5.0 10.51 (9.3) U.S. agencies and other 551 8.3 6.11 430 5.8 5.47 28.1 Total securities 4,255 70.7 6.74 5,058 74.5 5.97 (15.9) Unrealized gain/(loss) on available-for-sale securities (138) 51 Net securities 4,117 5,109 Trading account securities 82 1.1 5.44 64 .6 3.80 28.1 Federal funds sold and resale agreements 311 4.6 6.00 547 4.3 3.19 (43.1) Loans: Commercial: Commercial 7,496 165.1 8.93 6,253 105.6 6.85 19.9 Financial institutions 724 6.9 3.87 1,715 11.7 2.77 (57.8) Real estate: Commercial mortgage 2,444 51.5 8.55 2,262 45.7 8.19 8.0 Construction 357 8.2 9.32 234 4.2 7.28 52.6 Total commercial 11,021 231.7 8.53 10,464 167.2 6.48 5.3 Consumer: Residential mortgage 5,069 96.1 7.69 5,312 98.5 7.52 (4.6) Residential mortgage held for sale 174 3.5 8.16 680 11.2 6.68 (74.4) Home equity and second mortgage 2,445 56.7 9.40 1,954 38.8 8.05 25.1 Credit card 2,294 71.5 12.64 1,736 56.2 13.13 32.1 Other 3,589 89.7 10.14 2,910 64.0 8.92 23.3 Total consumer 13,571 317.5 9.49 12,592 268.7 8.65 7.8 Total loans 24,592 549.2 9.06 23,056 435.9 7.67 6.7 Allowance for credit losses 478 480 (.4) Net loans 24,114 22,576 6.8 Other earning assets 226 3.5 6.28 245 3.0 4.97 (7.8) Total earning assets* 29,466 629.1 8.66 28,970 518.3 7.26 1.7 Cash and due from banks 1,677 1,718 (2.4) Other assets 2,175 1,900 14.5 Total assets $32,702 $32,159 1.7% LIABILITIES AND SHAREHOLDERS' EQUITY Noninterest-bearing deposits $5,511 $6,669 (17.4)% Interest-bearing deposits: Interest checking 2,967 12.4 1.69 3,087 10.4 1.37 (3.9) Money market accounts 3,739 34.3 3.72 4,161 25.1 2.45 (10.1) Other savings accounts 1,933 12.2 2.56 1,937 10.9 2.28 (.2) Savings certificates 8,347 102.3 4.97 7,638 71.0 3.77 9.3 Certificates over $100,000 1,078 17.2 6.47 1,419 19.5 5.57 (24.0) Total interest-bearing deposits 18,064 178.4 4.01 18,242 136.9 3.04 (1.0) Short-term borrowings 2,801 41.0 5.94 1,682 16.0 3.86 66.5 Long-term debt 2,669 42.9 6.52 1,973 25.9 5.32 35.3 Total interest-bearing liabilities 23,534 262.3 4.52 21,897 178.8 3.31 7.5 Other liabilities 1,020 875 16.6 Preferred equity 106 221 (52.0) Common equity 2,623 2,467 6.3 Unrealized gain/(loss) on available-for-sale securities, net of taxes (92) 30 (406.7) Total liabilities and shareholders' equity $32,702 $32,159 1.7% Net interest income $366.8 $339.5 Gross interest margin 4.14% 3.95% Gross interest margin without taxable- equivalent increments 4.09% 3,89% Net interest margin 5.05% 4.75% Net interest margin without taxable- equivalent increments 5.00% 4.70%
Interest and rates are presented on a fully taxable-equivalent basis under a tax rate of 35 percent. Interest income and rates on loans include loan fees. Nonaccrual loans are included in average loan balances. * Before deducting the allowance for credit losses and excluding the unrealized gain/(loss) on available-for-sale securities. PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - The 66th Annual Meeting of Shareholders of First Bank System, Inc. was held on Wednesday, April 26, 1995, at the Minneapolis Convention Center. John F. Grundhofer, Chairman, President and Chief Executive Officer, presided. The holders of 115,834,705 shares of common stock, 87 percent of the 133,374,350 outstanding shares entitled to vote, were represented at the meeting in person or by proxy. The candidates for election as Class III Directors listed in the proxy statement were elected to serve three-year terms expiring at the 1998 annual shareholders' meeting. The tabulation for each nominee for office is listed in the table below. The proposal to ratify the appointment of Ernst & Young LLP as the Company's independent auditors for the year ending December 31, 1995, was approved. The proposal to amend the Company's 1991 Stock Incentive Plan to provide for an increase in the number of stock options automatically granted at the date of each Annual Meeting of Stockholders and to provide for the grant of certain "reload" options to nonemployee directors was approved. The 1995 Executive Incentive Plan was approved. SUMMARY OF MATTERS VOTED UPON BY SHAREHOLDERS
NUMBER OF SHARES IN FAVOR WITHHELD Election of Class III Directors: John F. Grundhofer 115,329,085 505,620 Delbert W. Johnson 115,344,781 489,924 John H. Kareken 115,321,271 513,434 Kenneth A. Macke 115,289,206 545,499 IN FAVOR AGAINST ABSTAINED NON VOTE Other Matters: Ratification of appointment of Ernst & Young LLP as independent auditors 115,232,026 328,008 274,671 -- Amendments to 1991 Stock Incentive Plan 94,668,524 19,965,192 1,200,989 -- Approval of 1995 Executive Incentive Plan 107,074,303 7,622,647 1,137,755 --
For a copy of the meeting minutes, please write to the Office of the Secretary, First Bank System, P.O. Box 522, Minneapolis, Minnesota 55480. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 10A First Bank System, Inc. 1991 Stock Incentive Plan, as amended* 10B First Bank System, Inc. 1995 Executive Incentive Plan* 10C First Bank System, Inc. Nonqualified Supplemental Executive Retirement Plan, as amended* 11 Computation of Primary and Fully Diluted Net Income Per Common Share 12 Computation of Ratio of Earnings to Fixed Charges 27 Article 9 Financial Data Schedule* (b) REPORTS ON FORM 8-K During the three months ended March 31, 1995, the Company filed the following reports on Form 8-K: Form 8-K/A filed February 13, 1995, amending the Form 8-K filed on August 5, 1994, to include revised pro forma financial information. Form 8-K filed March 3, 1995, which includes the Company's restated consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 1994, to give effect to the acquisition of Metropolitan Financial Corporation. Form 8-K/A filed on March 7, 1995, amending the Form 8-K filed on March 3, 1995, which was originally filed with a technical EDGAR error. *Copies of this exhibit will be furnished upon request and payment of the Company's reasonable expenses in furnishing the exhibit. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FIRST BANK SYSTEM, INC. /s/ DAVID J. PARRIN By: David J. Parrin Senior Vice President & Controller (Chief Accounting Officer and Duly Authorized Officer) May 12, 1995 First Bank System P.O. BOX 522 MINNEAPOLIS, MINNESOTA 55480 First Class U.S. Postage PAID Permit No. 2440 Minneapolis, MN SHAREHOLDER INQUIRIES STOCK AND DIVIDEND INFORMATION FOR MATTERS RELATED SPECIFICALLY TO FIRST BANK SYSTEM STOCK RECORDS OR DIVIDEND PAYMENTS, CONTACT THE OFFICE OF THE CORPORATE SECRETARY, (612) 973-0334. DIVIDEND REINVESTMENT FOR INFORMATION REGARDING FIRST BANK SYSTEM'S DIVIDEND REINVESTMENT PLAN, CONTACT FIRST CHICAGO TRUST COMPANY OF NEW YORK, P.O. BOX 13531, NEWARK, NEW JERSEY 07188-0001, (800) 446-2617. FINANCIAL INFORMATION FOR FURTHER INFORMATION CONTACT JOHN DANIELSON, SENIOR VICE PRESIDENT, (612) 973-2261, OR KARIN GLASGOW, ASSISTANT VICE PRESIDENT, (612) 973-2264. EX-10.A 2 FIRST BANK SYSTEM, INC. 1991 STOCK INCENTIVE PLAN (Including Amendments Effective April 21, 1993, Amendments Effective April 28, 1994 and Amendments Effective April 26, 1995) SECTION 1. PURPOSE; EFFECT ON PRIOR PLANS. (a) Purpose. The purpose of the First Bank System, Inc. 1991 Stock Incentive Plan (the "Plan") is to aid in attracting and retaining management personnel and members of the Board of Directors who are not also employees ("Non-Employee Directors") of First Bank System, Inc. (the "Company") capable of assuring the future success of the Company, to offer such personnel and Non-Employee Directors incentives to put forth maximum efforts for the success of the Company's business and to afford such personnel and Non-Employee Directors an opportunity to acquire a proprietary interest in the Company. (b) Effect on Prior Plans. From and after the effective date of the Plan, no stock options or restricted stock awards shall be granted under the Company's 1987 Stock Option Plan and Special Performance and Retention Plan. All outstanding stock options and restricted stock awards previously granted under the 1987 Stock Option Plan and Special Performance and Retention Plan shall remain outstanding in accordance with the terms thereof. SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall have the meanings set forth below: (a) "Affiliate" shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, as determined by the Committee. (b) "Award" shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent or other Stock-Based Award granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Award granted under the Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder. (e) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan and composed of not less than three directors, each of whom is a "disinterested person" within the meaning of Rule 16b-3. Each member of the Committee shall be an "outside director" within the meaning of Section 162(m) of the Code. (f) "Dividend Equivalent" shall mean any right granted under Section 6(e) of the Plan. (g) "Eligible Person" shall mean any employee, officer, consultant or independent contractor providing services to the Company or any Affiliate who the Committee determines to be an Eligible Person. Eligible Person shall not include any Non-Employee Director, who shall receive Awards only pursuant to Section 6(h) of the Plan. (h) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee or, in the case of grants pursuant to Section 6(h), the Board of Directors. Notwithstanding the foregoing, for purposes of the Plan, the Fair Market Value of Shares on a given date shall be the closing price of the Shares as reported on the New York Stock Exchange on such date, if the Shares are then quoted on the New York Stock Exchange. (i) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision. (j) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan, or Section 6(h) of the Plan in the case of grants to Non-Employee Directors, that is not intended to be an Incentive Stock Option. (k) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. (l) "Other Stock-Based Award" shall mean any right granted under Section 6(f) of the Plan. (m) "Participant" shall mean an Eligible Person designated to be granted an Award under the Plan. (n) "Performance Award" shall mean any right granted under Section 6(d) of the Plan. (o) "Person" shall mean any individual, corporation, partnership, association or trust. (p) "Restricted Stock" shall mean any Share granted under Section 6(c) of the Plan. (q) "Restricted Stock Unit" shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date. (r) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. (s) "Shares" shall mean shares of Common Stock, $1.25 par value, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan. (t) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. SECTION 3. ADMINISTRATION. (a) Power and Authority of the Committee. The Plan shall be administered by the Committee; provided, however, that Section 6(h) of the Plan shall not be administered by the Committee but rather by the Board of Directors subject to the provisions and restrictions of such Section 6(h). Subject to the terms of the Plan and applicable law, and except with respect to Section 6(h) of the Plan, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights or other matters are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement and accelerate the exercisability of Options or the lapse of restrictions relating to Restricted Stock or Restricted Stock Units; (vi) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended; (vii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee; (viii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; (ix) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award and any employee of the Company or any Affiliate. (b) Meetings of the Committee. The Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as the Committee may determine. A majority of the Committee's members shall constitute a quorum. All determinations of the Committee shall be made by not less than a majority of its members. Any decision or determination reduced to writing and signed by all of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary and may make such rules and regulations for the conduct of its business as it shall deem advisable. SECTION 4. SHARES AVAILABLE FOR AWARDS. (a) Shares Available. Subject to adjustment as provided in Section 4(c), the number of Shares available for granting Awards under the Plan shall be 5,000,000. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited, or if an Award otherwise terminates without delivery of any Shares, then the number of Shares counted against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture or termination, shall again be available for granting Awards under the Plan. In addition, any Shares that are used by a Participant as full or partial payment to the Company of the purchase price relating to an Award, or in connection with satisfaction of tax obligations relating to an Award in accordance with the provisions of Section 8(a) of the Plan, shall again be available for granting Awards to Eligible Persons who are not officers or directors of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, as amended. (b) Accounting for Awards. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for granting Awards under the Plan. (c) Adjustments. In the event that the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors) shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors) to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors) shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) which thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards and (iii) the purchase or exercise price with respect to any Award; provided, however, that the number of Shares covered by any Award or to which such Award relates shall always be a whole number. (d) Incentive Stock Options. Notwithstanding the foregoing, the number of Shares available for granting Incentive Stock Options under the Plan shall not exceed 3,000,000, subject to adjustment as provided in the Plan and Section 422 or 424 of the Code or any successor provisions. (e) Award Limitations Under the Plan. No Eligible Person may be granted any Award or Awards, the value of which Awards are based solely on an increase in the value of the Shares after the date of grant of such Awards, for more than 500,000 Shares, in the aggregate, in any three calendar year period beginning with the period commencing January 1, 1994 and ending December 31, 1996; provided, however, that such limitation shall apply only to Shares available for granting Awards under the Plan pursuant to amendments to the Plan submitted for stockholder approval at the Company's 1994 annual meeting of stockholders and amendments adopted thereafter. The foregoing limitation specifically includes the grant of any "performance-based" Awards within the meaning of ss.162(m) of the Code. SECTION 5. ELIGIBILITY. Any Eligible Person, including any Eligible Person who is an officer or director of the Company or any Affiliate, shall be eligible to be designated a Participant; provided, however, that an Incentive Stock Option may only be granted to full or part-time employees (which term as used herein includes, without limitation, officers and directors who are also employees) and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a "subsidiary corporation" of the Company within the meaning of Section 424(f) of the Code or any successor provision. Non-Employee Directors shall receive Awards of Non-Qualified Stock Options as provided in Section 6(h) of the Plan. SECTION 6. AWARDS. (a) Options. The Committee is hereby authorized to grant Options to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee; provided, however, that such purchase price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the Committee. (iii) Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made. (iv) Reload Options. The Committee may grant "reload" options, separately or together with another Option, pursuant to which, subject to the terms and conditions established by the Committee and any applicable requirements of Rule 16b-3 or any other applicable law, the Participant would be granted a new Option when the payment of the exercise price of a previously granted option is made by the delivery of shares of the Company's Common Stock owned by the Participant pursuant to Section 6(a)(iii) hereof or the relevant provisions of another plan of the Company, and/or when shares of the Company's Common Stock are tendered or forfeited as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of an option, which new Option would be an option to purchase the number of Shares not exceeding the sum of (A) the number of shares of the Company's Common Stock provided as consideration upon the exercise of the previously granted option to which such "reload" option relates and (B) the number of shares of the Company's Common Stock tendered or forfeited as payment of the amount to be withheld under applicable income tax laws in connection with the exercise of the option to which such "reload" option relates. "Reload" options may be granted with respect to options previously granted under this Plan, the First Bank System 1987 Stock Option Plan or any other stock option plan of the Company, and may be granted in connection with any Option granted under this Plan at the time of such grant. Such "reload" options shall have a per share exercise price equal to the Fair Market Value as of the date of grant of the new Option. (b) Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Participants subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate. (c) Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Participants with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine: (i) Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. (ii) Stock Certificates. Any Restricted Stock granted under the Plan shall be evidenced by issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. (iii) Forfeiture; Delivery of Shares. Except as otherwise determined by the Committee, upon termination of employment (as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units at such time subject to restriction shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units. Shares representing Restricted Stock that is no longer subject to restrictions shall be delivered to the holder thereof promptly after the applicable restrictions lapse or are waived. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holders of the Restricted Stock Units. (d) Performance Awards. The Committee is hereby authorized to grant Performance Awards to Participants subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock), other securities, other Awards or other property and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of such performance goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan and any applicable Award Agreement, the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted and the amount of any payment or transfer to be made pursuant to any Performance Award shall be determined by the Committee. (e) Dividend Equivalents. The Committee is hereby authorized to grant to Participants Dividend Equivalents under which such Participants shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, such Dividend Equivalents may have such terms and conditions as the Committee shall determine. (f) Other Stock-Based Awards. The Committee is hereby authorized to grant to Participants such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan; provided, however, that such grants must comply with Rule 16b-3 and applicable law. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 6(f) shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms (including without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), as the Committee shall determine, the value of which consideration, as established by the Committee, shall not be less than 100% of the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. (g) General. Except as otherwise specified with respect to Awards to Non-Employee Directors pursuant to Section 6(h) of the Plan: (i) No Cash Consideration for Awards. Awards shall be granted for no cash consideration or for such minimal cash consideration as may be required by applicable law. (ii) Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any plan of the Company or any Affiliate other than the Plan. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any such other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iii) Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents with respect to installment or deferred payments. (iv) Limits on Transfer of Awards. No Award and no right under any such Award shall be transferable by a Participant otherwise than by will or by the laws of descent and distribution; provided, however, that, if so determined by the Committee, a Participant may, in the manner established by the Committee, designate a beneficiary or beneficiaries to exercise the rights of the Participant and receive any property distributable with respect to any Award upon the death of the Participant. Each Award or right under any Award shall be exercisable during the Participant's lifetime only by the Participant or, if permissible under applicable law, by the Participant's guardian or legal representative. No Award or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee. (vi) Restrictions; Securities Exchange Listing. All certificates for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors) may deem advisable under the Plan or the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state securities laws, and the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors) may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange. (h) Non-Qualified Stock Options to Non-Employee Directors. The Board of Directors shall issue Non-Qualified Stock Options to Non-Employee Directors in accordance with this Section 6(h). Each Non-Employee Director serving on the Company's Board of Directors immediately following the 1993 Annual Meeting of Stockholders of the Company shall be granted, as of the date of such meeting, a Non-Qualified Stock Option to purchase 2,500 Shares (subject to adjustment pursuant to Section 4(c) of the Plan). Each Non-Employee Director first elected or appointed to the Company's Board of Directors after the 1993 Annual Meeting of Stockholders and during the term of the Plan shall be granted, as of the date of such Director's first election or appointment to the Board of Directors, a Non-Qualified Stock Option to purchase 2,500 Shares (subject to adjustment pursuant to Section 4(c) of the Plan). After the initial grant to each Non-Employee Director as set forth above in this Section 6(h), each such Director shall be granted during the term of the Plan, as of the date of each Annual Meeting of Stockholders of the Company, if such Director's term of office continues after such date, a Non-Qualified Stock Option to purchase 1,000 Shares (subject to adjustment pursuant to Section 4(c) of the Plan); provided that such number of shares shall be increased from 1,000 Shares to 1,500 Shares (subject to adjustment pursuant to Section 4(c) of the Plan) for any such grants occurring on or after the date of the Company's 1995 Annual Meeting of Stockholders. Each Non-Qualified Stock Option granted to a Non-Employee Director pursuant to this Section 6(h) shall be exercisable in full as of the date of grant, shall have an exercise price equal to the Fair Market Value of a Share on the date of grant and shall expire on the tenth anniversary of the date of grant, except as provided below. This Section 6(h) shall not be amended more than once every six months other than to comport with changes in the Code, the Employee Retirement Income Security Act or the rules and regulations thereunder. Subject to the last sentence of this paragraph, and except as hereinafter provided, each Option granted pursuant to this Section 6(h) on or after the date of the Company's 1995 Annual Meeting of Stockholders shall include, and all outstanding Options on the date of the Company's 1995 Annual Meeting of Stockholders granted pursuant to this Section 6(h) shall be deemed amended to include, a provision entitling the optionee to a further Non-Qualified Stock Option (a "Non-Employee Director Reload Option") in the event the optionee exercises such an Option, in whole or in part, by surrendering other Shares in accordance with this Section 6(h) and the terms of the Option. Any such Non-Employee Director Reload Option (i) shall be for a number of Shares equal to the number of Shares surrendered as part or all of the exercise price of the Option to which it relates; (ii) shall have an expiration date which is the same as the expiration date of the Option to which it relates; (iii) shall have an exercise price equal to the Fair Market Value of a Share on the date of exercise of the Option to which it relates; and (iv) shall be exercisable in full as of the date of grant. A Non-Employee Director Reload Option may be reloaded under the same terms, provided that the original Option to which such series of Non-Employee Director Reload Options relates may be reloaded a maximum of three times. Non-Employee Director Reload Options shall only be granted to a Director during such Director's term as a Non-Employee Director. Any such Non-Employee Director Reload Option shall be subject to availability of sufficient shares for grant under the Plan. Shares surrendered as part or all of the exercise price of the Option to which it relates that have been owned by the optionee less than six months will not be counted for purposes of determining the number of Shares that may be purchased pursuant to a Non-Employee Director Reload Option. The provisions of this paragraph shall not become effective and shall be void unless and until receipt by the Company of an interpretive letter from the Securities and Exchange Commission or an opinion of counsel reasonably acceptable to the Company to the effect that the grant of such reload options will not cause any such Non-Employee Director to lose his or her status as a "disinterested person" under Rule 16b-3 of the Securities Exchange Act of 1934, as amended. All grants of Non-Qualified Stock Options pursuant to this Section 6(h) shall be automatic and non-discretionary and shall be made strictly in accordance with the foregoing terms and the following additional provisions: (i) Non-Qualified Stock Options granted to a Non-Employee Director hereunder shall terminate and may no longer be exercised if such Director ceases to be a Non-Employee Director of the Company, except that: (A) If such Director's term shall be terminated for any reason other than gross and willful misconduct, death, disability, or retirement, such Director may at any time within a period of three months after such termination, but not after the termination date of the Option, exercise the Option. (B) If such Director's term shall be terminated by reason of gross and willful misconduct during the course of the term, including but not limited to, wrongful appropriation of funds of the Company or the commission of a gross misdemeanor or felony, the Option shall be terminated as of the date of the misconduct. (C) If such Director's term shall be terminated by reason of disability or retirement, such Director may exercise the Option in accordance with the terms thereof as though such termination had never occurred. If such Director shall die following any such termination, the Option may be exercised in accordance with its terms by the personal representatives or administrators of such Director or by any person or persons to whom the Option has been transferred by will or the applicable laws of descent and distribution. (D) If such Director shall die while a Director of the Company or within three months after termination of such Director's term for any reason other than disability or retirement or gross and willful misconduct, the Option may be exercised in accordance with its terms by the personal representatives or administrators of such Director or by any person or persons to whom the Option has been transferred by will or the applicable laws of descent and distribution. (ii) Non-Qualified Stock Options granted to Non-Employee Directors may be exercised in whole or in part from time to time by serving written notice of exercise on the Company at its principal executive offices, to the attention of the Company's Secretary. The notice shall state the number of shares as to which the Option is being exercised and be accompanied by payment of the purchase price. A Non-Employee Director may, at such Director's election, pay the purchase price by check payable to the Company, by promissory note, or in shares of the Company's Common Stock, or in any combination thereof having a Fair Market Value on the exercise date equal to the applicable exercise price. If payment or partial payment is made by promissory note, such note shall (A) be secured by the Shares to be delivered upon exercise of such Option (other than those withheld in payment of taxes as set forth below), (B) be limited in principal amount to the maximum amount permitted under applicable laws, rules and regulations, (C) be for a term of six years and (D) bear interest at the applicable federal rate (as determined in accordance with Section 1274(d) of the Code), compounded semi-annually. (iii) In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Non-Employee Director, are withheld or collected from such Director. At any time when a Non-Employee Director is required to pay the Company an amount required to be withheld under applicable income tax laws in connection with an Option granted pursuant to this Section 6(h), such Director may (A) elect to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise of such Option with a Fair Market Value equal to the amount of such taxes (an "Election") or (B) deliver to the Company Shares other than Shares issuable upon exercise of such Option with a Fair Market Value equal to the amount of such taxes. An Election, if any, must be made on or before the date that the amount of tax to be withheld is determined. The Board of Directors may disapprove of any Election, may suspend or terminate the right to make Elections, may limit the amount of any Election, and may make rules concerning the required information to be included in any Election. Non-Employee Directors may only make an Election in compliance with the Rules established by the Company to comply with Section 16(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS. Except to the extent prohibited by applicable law and unless otherwise expressly provided in an Award Agreement or in the Plan: (a) Amendments to the Plan. The Board of Directors of the Company may amend, alter, suspend, discontinue or terminate the Plan; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the stockholders of the Company, no such amendment, alteration, suspension, discontinuation or termination shall be made that, absent such approval: (i) would cause Rule 16b-3 to become unavailable with respect to the Plan; (ii) would violate the rules or regulations of the New York Stock Exchange, any other securities exchange or the National Association of Securities Dealers, Inc. that are applicable to the Company; or (iii) would cause the Company to be unable, under the Code, to grant Incentive Stock Options under the Plan. (b) Amendments to Awards. Except with respect to Awards granted pursuant to Section 6(h) of the Plan, the Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. The Committee may not amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, without the consent of the Participant or holder or beneficiary thereof, except as otherwise herein provided. (c) Correction of Defects, Omissions and Inconsistencies. The Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors) may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem desirable to carry the Plan into effect. SECTION 8. INCOME TAX WITHHOLDING; TAX BONUSES. (a) Withholding. In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all federal and state taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (i) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (ii) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined. (b) Tax Bonuses. The Committee, in its discretion, shall have the authority, at the time of grant of any Award under this Plan or at any time thereafter, to approve cash bonuses to designated Participants to be paid upon their exercise or receipt of (or the lapse of restrictions relating to) Awards in order to provide funds to pay all or a portion of federal and state taxes due as a result of such exercise or receipt (or the lapse of such restrictions). The Committee shall have full authority in its discretion to determine the amount of any such tax bonus. SECTION 9. GENERAL PROVISIONS. (a) No Rights to Awards. Except as otherwise provided in Section 6(h) of the Plan, no Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to different Participants. (b) Delegation. The Committee may delegate to one or more officers of the Company or any Affiliate or a committee of such officers the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to Eligible Persons who are not officers or directors of the Company for purposes of Section 16 of the Securities Exchange Act of 1934, as amended. (c) Award Agreements. No Participant will have rights under an Award granted to such Participant unless and until an Award Agreement shall have been duly executed on behalf of the Company. (d) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (e) No Right to Employment, Etc. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ, or as giving a Non-Employee Director the right to continue as a Director, of the Company or any Affiliate. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment, or terminate the term of a Non-Employee Director, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. (f) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Minnesota. (g) Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors), such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors), materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect. (h) No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate. (i) No Franctional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee (or, in the case of grants under Section 6(h) of the Plan, the Board of Directors) shall determine whether cash shall be paid in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated. (j) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. SECTION 10. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of the date of its approval by the stockholders of the Company. SECTION 11. TERM OF THE PLAN. Awards shall only be granted under the Plan during a 10-year period beginning on the effective date of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond the end of such 10-year period, and the authority of the Committee provided for hereunder with respect to the Plan and any Awards, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond the end of such period. EX-10.B 3 FIRST BANK SYSTEM, INC. 1995 EXECUTIVE INCENTIVE PLAN 1. ESTABLISHMENT. On February 15, 1995, the Board of Directors of FIRST BANK SYSTEM, INC., upon recommendation by the Compensation and Human Resources Committee of the Board of Directors, approved a 1995 executive incentive plan for executives as described herein, which plan shall be known as the "FIRST BANK SYSTEM, INC. 1995 EXECUTIVE INCENTIVE PLAN." This Plan shall be submitted for approval by the stockholders of First Bank System, Inc. at the 1995 Annual Meeting of Stockholders. This Plan shall be effective as of January 1, 1995, subject to its approval by the stockholders, and no benefits shall be issued pursuant thereto until after this Plan has been approved by the stockholders. 2. PURPOSE. The purpose of this Plan is to advance the interests of First Bank System, Inc. and its stockholders by attracting and retaining key employees, and by stimulating the efforts of such employees to contribute to the continued success and growth of the business of the Company. 3. DEFINITIONS. When the following terms are used herein with initial capital letters, they shall have the following meanings: 3.1. BASE SALARY - a Participant's annualized base salary, as determined by the Committee, as of the last day of a Performance Period. 3.2. CODE - the Internal Revenue Code of 1986, as it may be amended from time to time, and any proposed, temporary or final Treasury Regulations promulgated thereunder. 3.3. COMMITTEE - the Compensation and Human Resources Committee of the Board of Directors of the Company designated by such Board to administer the Plan which shall consist of members appointed from time to time by the Board of Directors. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 and, following the 1996 Annual Meeting of Stockholders of the Company, an "outside director" within the meaning of Section 162(m) of the Code. 3.4. COMPANY - First Bank System, Inc. a Delaware corporation, and any of its subsidiaries or affiliates, whether now or hereafter established. 3.5. MAXIMUM AWARD PERCENTAGE - a percentage, which may be greater or less than 100%, as determined by the Committee with respect to each Performance Period and with respect to each Performance Threshold. 3.6. PARTICIPANT - any executive officer of the Company who is also an "officer" within the meaning of Section 16(a) of the Securities Exchange Act of 1934 and who is designated by the Committee, as provided for herein, to participate with respect to a Performance Period as a Participant in this Plan. Directors of the Company who are not also employees of the Company are not eligible to participate in the Plan. 3.7. PERFORMANCE THRESHOLD - the preestablished, objective performance goals selected by the Committee with respect to each Performance Period and which shall be based solely on ROA . 3.8. PERFORMANCE PERIOD - each consecutive twelve-month period commencing on January 1 of each year during the term of this Plan and coinciding with the Company's fiscal year. 3.9. PLAN - this FIRST BANK SYSTEM, INC., 1995 EXECUTIVE INCENTIVE PLAN. 3.10. RETURN ON ASSETS OR ROA - a percentage computed as the Company's consolidated net income for its fiscal year divided by the Company's consolidated total average assets for such fiscal year. The Company's Return on Assets shall be computed in accordance with generally accepted accounting principles, as in effect from time to time, as applied by the Company in the preparation of its financial statements included as part of its Form 10-K, as filed with the Securities and Exchange Commission. The Company's Return on Assets computed in accordance with the foregoing for a fiscal year shall be adjusted to eliminate the effect of (1) changes in generally accepted accounting principles; (2) merger related charges; and (3) extraordinary items. 3.11. TARGET AWARD - a percentage, which may be greater or less than 100%, as determined by the Committee with respect to each Performance Period. 4. ADMINISTRATION. 4.1. POWER AND AUTHORITY OF COMMITTEE. The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to all the applicable provisions of the Plan and applicable law, to (a) establish, amend, suspend or waive such rules and regulations and appoint such agents as it deems necessary or advisable for the proper administration of the Plan, (b) construe, interpret and administer the Plan and any instrument or agreement relating to the Plan, and (c) make all other determinations and take all other actions necessary or advisable for the administration of the Plan. Unless otherwise expressly provided in the Plan, each determination made and each action taken by the Committee pursuant to the Plan or any instrument or agreement relating to the Plan (x) shall be within the sole discretion of the Committee, (y) may be made at any time and (z) shall be final, binding and conclusive for all purposes on all persons, including, but not limited to, Participants and their legal representatives and beneficiaries, and employees of the Company. 4.2. DETERMINATIONS MADE PRIOR TO EACH PERFORMANCE PERIOD. At any time ending on or before the 90th day of each Performance Period, the Committee shall: (a) designate all Participants and their Target Awards for such Performance Period; and (b) With respect to each Participant, establish one or more objective Performance Thresholds (including a minimum level of achievement), based solely on ROA, and a corresponding Maximum Award Percentage for each Performance Threshold; 4.3. CERTIFICATION. Following the close of each Performance Period and prior to payment of any amount to any Participant under the Plan, the Committee must certify in writing the Company's ROA for that Performance Period (and the corresponding Performance Thresholds) and certify as to the attainment of all other factors upon which any payments to a Participant for that Performance Period are to be based. 4.4. STOCKHOLDER APPROVAL. The material terms of this Plan shall be disclosed to and approved by stockholders of the Company in accordance with Section 162(m) of the Code. No amount shall be paid to any Participant under this Plan unless such stockholder approval has been obtained. 5. INCENTIVE PAYMENT. 5.1. FORMULA. Each Participant shall receive a bonus payment for each Performance Period in an amount not greater than: (a) the Participant's Base Pay for the Performance Period, multiplied by (b) the Participant's Target Award for the Performance Period, multiplied by (c) the Participant's Maximum Award Percentage for the Performance Period that corresponds to the Performance Threshold achieved by the Company for that Performance Period. 5.2. LIMITATIONS. (a) MINIMUM ROA ACHIEVEMENT. In no event shall any Participant receive any payment hereunder unless the Company's ROA for a Performance Period is at least equal to a minimum percentage as determined by the Committee for that Performance Period. (b) DISCRETIONARY REDUCTION. The Committee shall retain sole and full discretion to reduce by any amount the incentive payment otherwise payable to any Participant under this Plan. (c) CONTINUED EMPLOYMENT. Except as otherwise provided by the Committee, no incentive payment under this Plan with respect to a Performance Period shall be paid or owed to a Participant whose employment terminates prior to the last day of such Performance Period. (d) MAXIMUM PAYMENTS. No Participant shall receive a payment under this Plan for any Performance Period in excess of $1.5 million. 6. BENEFIT PAYMENTS. 6.1. TIME AND FORM OF PAYMENTS. Subject to any deferred compensation election pursuant to any such plans of the Company applicable hereto, benefits shall be paid to the Participant in a single lump sum cash payment as soon as administratively feasible after the Committee has certified that the Company Performance Threshold has been attained. 6.2. NONTRANSFERABILITY. Participants and beneficiaries shall not have the right to assign, encumber or otherwise anticipate the payments to be made under this Plan, and the benefits provided hereunder shall not be subject to seizure for payment of any debts or judgments against any Participant or any beneficiary. 6.3. TAX WITHHOLDING. In order to comply with all applicable federal or state income, social security, payroll, withholding or other tax laws or regulations, the Committee may establish such policy or policies as it deems appropriate with respect to such laws and regulations, including without limitation, the establishment of policies to ensure that all applicable federal or state income, social security, payroll, withholding or other taxes, which are the sole and absolute responsibility of the Participant, are withheld or collected from such Participant. 7. AMENDMENT AND TERMINATION; ADJUSTMENTS. Except to the extent prohibited by applicable law and unless otherwise expressly provided in the Plan: (a) AMENDMENTS TO THE PLAN. The Committee may amend this Plan prospectively at any time and for any reason deemed sufficient by it without notice to any person affected by this Plan and may likewise terminate or curtail the benefits of this Plan both with regard to persons expecting to receive benefits hereunder in the future and persons already receiving benefits at the time of such action. (b) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent it shall deem desirable to carry the Plan into effect. 8. MISCELLANEOUS. 8.1. EFFECTIVE DATE. This Plan shall be deemed effective, subject to stockholder approval, as of January 1, 1995. 8.2. HEADINGS. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. 8.3. APPLICABILITY TO SUCCESSORS. This Plan shall be binding upon and inure to the benefit of the Company and each Participant, the successors and assigns of the Company, and the beneficiaries, personal representatives and heirs of each Participant. If the Company becomes a party to any merger, consolidation or reorganization, this Plan shall remain in full force and effect as an obligation of the Company or its successors in interest. 8.4. EMPLOYMENT RIGHTS AND OTHER BENEFIT PROGRAMS. The provisions of this Plan shall not give any Participant any right to be retained in the employment of the Company. In the absence of any specific agreement to the contrary, this Plan shall not affect any right of the Company, or of any affiliate of the Company, to terminate, with or without cause, any Participant's employment at any time. This Plan shall not replace any contract of employment, whether oral or written, between the Company and any Participant, but shall be considered a supplement thereto. This Plan is in addition to, and not in lieu of, any other employee benefit plan or program in which any Participant may be or become eligible to participate by reason of employment with the Company. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the purpose of computing such Participant's compensation under any compensation-based retirement, disability, or similar plan of the Company unless required by law or otherwise provided by such other plan. 8.5. NO TRUST OR FUND CREATED. This Plan shall not create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any affiliate pursuant to this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company or of any affiliate. 8.6. GOVERNING LAW. The validity, construction and effect of the Plan or any incentive payment payable under the Plan shall be determined in accordance with the laws of the State of Minnesota. 8.7. SEVERABILITY. If any provision of the Plan is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan, such provision shall be stricken as to such jurisdiction, and the remainder of the Plan shall remain in full force and effect. 8.8. QUALIFIED PERFORMANCE-BASED COMPENSATION. All of the terms and conditions of the Plan shall be interpreted in such a fashion as to qualify all compensation paid hereunder as "qualified performance-based compensation" within the meaning of Section 162(m) of the Code. EX-10.C 4 FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective January 1, 1992 And As Amended By The FIRST AMENDMENT Adopted October 21, 1991 But Effective January 1, 1992 The SECOND AMENDMENT Adopted January 20, 1993 But Effective January 1, 1992 The THIRD AMENDMENT Adopted January 18, 1995 But Effective January 1, 1992 and January 1, 1995 FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Effective January 1, 1992 TABLE OF CONTENTS
Page SECTION 1. INTRODUCTION ............................................................................ 1 1.1. History 1.2. Definitions 1.2.1. Accrual Percentage 1.2.2. Accrued SERP Benefit 1.2.3. Actuarial Equivalent 1.2.4. Affiliate 1.2.5. Average Compensation 1.2.6. Beneficiary 1.2.7. CAP 1.2.8. Change in Control 1.2.9. Compensation 1.2.10. Effective Date 1.2.11. Employer 1.2.12. FBS 1.2.13. Normal Retirement Age 1.2.14. Organization Committee 1.2.15. Participant 1.2.16. Plan 1.2.17. Plan Statement 1.2.18. PRA 1.2.19. Principal Sponsor 1.2.20. Prior Plans' Offset 1.2.21. Projected Average Compensation 1.2.22. Projected Compensation 1.2.23. Projected PIA 1.2.24. Projected PRA Account 1.2.25. Projected PRA Annuity 1.2.26. SERP Benefit 1.2.27. Service 1.2.28. Social Security Benefit 1.2.29. Survivor Benefit 1.2.30. Termination of Employment 1.3. Rules of Interpretation SECTION 2. ELIGIBILITY AND PARTICIPATION ........................................................... 8 2.1. General Eligibility Rule 2.2. Specific Exclusion SECTION 3. PARTICIPANT'S BENEFIT ................................................................... 9 3.1. SERP Benefit 3.2. Suspension of Benefits 3.3. Change in Control Distributions 3.3.1. Accelerated Determination of Participant Status 3.3.2. Accelerated Payment Upon Request 3.3.3. Forfeitures 3.4. Other Accelerated Distributions 3.4.1. When Available 3.4.2. Amount 3.4.3. Forfeitures 3.5. Effect on Service SECTION 4. FORM OF PAYMENT ......................................................................... 12 4.1. Optional Forms of Payment 4.2. Payments in Case of Incompetency or Disability 4.3. Small Benefits SECTION 5. DEATH BENEFITS .......................................................................... 13 5.1. Death Benefits 5.1.1. Death Before SERP Benefit Commencement 5.1.2. Death After SERP Benefit Commencement 5.2. Designation of Beneficiaries 5.2.1. Right to Designate 5.2.2. Failure of Designation 5.2.3. Disclaimers by Beneficiaries 5.2.4. Definitions 5.2.5. Special Rules 5.2.6. No Spousal Rights 5.3. Death Prior to Full Distribution SECTION 6. FUNDING OF PLAN ......................................................................... 16 6.1. Unfunded Agreement 6.2. Spendthrift Provision SECTION 7. AMENDMENT AND TERMINATION ............................................................... 17 SECTION 8. DETERMINATIONS - RULES AND REGULATIONS .................................................. 18 8.1. Determinations 8.2. Rules and Regulations 8.3. Method of Executing Instruments 8.4. Claims Procedure 8.4.1. Original Claim 8.4.2. Claims Review Procedure 8.4.3. General Rules 8.5. Information Furnished by Participants SECTION 9. PLAN ADMINISTRATION ..................................................................... 20 9.1. Principal Sponsor 9.1.1. Officers 9.1.2. Chief Executive Officer 9.1.3. Board of Directors 9.2. Conflict of Interest 9.3. Administrator 9.4. Service of Process 9.5. IRC and ERISA Status SECTION 10. DISCLAIMERS ............................................................................. 22 10.1. Term of Employment 10.2. Source of Payment 10.3. Delegation SCHEDULE I..................................................................................................... SI-1 SCHEDULE II.................................................................................................... SII-1 APPENDIX A - ACTUARIALLY EQUIVALENT BENEFITS .................................................................. A-1
FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN SECTION 1 INTRODUCTION 1.1. HISTORY. First Bank System, Inc., a Delaware corporation (hereinafter "Principal Sponsor") and certain subsidiaries of the Principal Sponsor have heretofore adopted and currently maintain a tax qualified defined benefit ("cash balance") pension plan known as the "First Bank System, Inc. Personal Retirement Account" (hereinafter "PRA") and a tax qualified defined contribution profit sharing plan (including a qualified cash or deferred arrangement, sometimes called a ss.401(k) feature) known as the First Bank System, Inc. Capital Accumulation Plan (hereinafter "CAP") for the purpose of developing retirement benefits for employees. PRA and CAP are subject to the Employee Retirement Income Security Act of 1974, as amended (hereinafter "ERISA") and they are intended to qualify under section 401(a) of the Internal Revenue Code of 1954, as amended (hereinafter "Code"). By operation of section 401(a) of the Code, benefits which may be paid under PRA are restricted so that they do not exceed certain maximum limitations established under section 415 of the Code. For benefits accruing under PRA during plan years beginning after December 31, 1988, the maximum amount of annual compensation which may be taken into account for any employee may not exceed a fixed dollar amount which is established under section 401(a)(17) of the Code. Regulations issued under section 401(a)(4) of the Code limit the amounts and types of remuneration that can be taken into account under PRA without engaging in discrimination in favor of highly compensated employees which is prohibited for tax qualified plans under the Code. ERISA authorizes the establishment of an unfunded, nonqualified plan of deferred compensation maintained by an employer solely for the purpose of providing benefits for employees which are in excess of the limitations on benefits imposed on qualified defined benefit plans by section 415 of the Code. ERISA also authorizes the establishment of an unfunded, nonqualified plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. To make provision for such benefits, effective January 1, 1984, the Principal Sponsor adopted the "First Bank System, Inc. Excess Benefit Plan" to provide benefits not otherwise available under PRA. Effective January 1, 1989, that Plan was amended and restated by the adoption of the "First Bank System, Inc. Excess Benefit Plan (1989 Restatement)." It is in the interest of this corporation to provide benefits to certain executive employees in excess of those available under PRA, to provide the full allocations for those certain employees under PRA without regard to the limitations on benefits imposed by section 415, 401(a)(17) and 401(a)(4) of the Code, to coordinate the benefits provided to them under PRA and the Excess Plan and that an unfunded nonqualified deferred compensation plan be maintained for those purposes. Therefore, this corporation does hereby establish this Plan, the terms and conditions of which are as follows. 1.2. DEFINITIONS. Words used herein with initial capital letters which are also defined in Section 1 of PRA shall have the meanings assigned in PRA unless a contrary intention is expressed herein. When used herein with initial capital letters, the following words have the following meanings: 1.2.1. ACCRUAL PERCENTAGE - a number not greater than one (expressed as either a decimal or a percentage) determined as of a specified date which is equal to (a) divided by (b) divided by (c): (a) Fifty-five percent (55%) of the Participant's Projected Average Compensation determined as of such specified date, minus the total of: (i) The Participant's Projected PRA Annuity determined as of such specified date, and (ii) Seventy-five percent (75%) of the Participant's Projected PIA determined as of such specified date, and (iii) The Participant's Prior Plans' Offset determined as of such specified date. (b) The Participant's Projected Average Compensation determined as of such specified date. (c) The number (never less than one) of total possible years of continuous and full time service with the Employer which the Participant could have completed from his or her most recent date of hire to his or her Normal Retirement Age. To the same extent that the Organization Committee determines under Section 1.2.11 of the Plan Statement that a business entity was an Employer prior to the date on which the business entity first became an Employer, the business entity shall be considered an Employer for the purposes of this subparagraph. The Accrual Percentage may decrease from time to time. 1.2.2. ACCRUED SERP BENEFIT - a dollar amount determined as of a specified date which is equal to the product of (a) multiplied by (b) multiplied by (c): (a) The Participant's Accrual Percentage determined as of such specified date. (b) The Participant's Average Compensation determined as of such specified date. (c) The number (which may be less than one, but may not exceed the number of years determined under Section 1.2.1(c)) of total years of continuous and full-time service with the Employer which the Participant has completed from his or her most recent date of hire to the date the Accrued SERP Benefit is determined; provided, however, that a Participant may receive credit for additional years of service, solely for purposes of this Section 1.2.2(c), under subparagraph (i), (ii) or (iii) below, but not under more than one subparagraph: (i) If a Participant attains age 60 while employed by an Employer, five additional years of service shall be added to the years of continuous and full-time service of such Participant. (ii) If a Participant is entitled to receive severance payments under a severance pay plan maintained by an Employer and such payments are made on account of a Change in Control, there shall be included within the years of continuous and full-time service of such Participant the number of years and fractions of years of such payments (even if such payments are paid in a lump sum or other accelerated manner). (iii) A Participant who terminates employment shall be credited with additional years of service to the extent such credit is expressly provided under the terms of an employment agreement or a change in control severance plan or agreement between the Participant and an Employer. The Accrued SERP Benefit may decrease from time to time. To the same extent that the Organization Committee determines under Section 1.2.11 of the Plan Statement that a business entity was an Employer prior to the date on which the business entity first became an Employer, the business entity shall be considered an Employer for the purposes of this subparagraph. 1.2.3. ACTUARIAL EQUIVALENT - a benefit of equivalent value computed on the basis of actuarial tables, factors and assumptions set forth in the Appendix A to this Plan Statement. 1.2.4. AFFILIATE - a business entity which is affiliated in ownership with the Principal Sponsor or an Employer and is recognized as an Affiliate by the Principal Sponsor for the purposes of this Plan. 1.2.5. AVERAGE COMPENSATION - a dollar amount which is the annual average of the Participant's Compensation for each of the thirty-six (36) calendar months ending with the last day of the calendar month immediately before the date the Average Compensation is determined. Average Compensation may decrease from time to time. For this purpose, short term annual incentive compensation which has been determined in fact by the Employer before the date as of which the Average Compensation is determined shall be treated as if paid in fact before such event. If it is not so determined before such date, it shall be wholly disregarded for the purposes of this Plan. For this purpose, short term annual incentive compensation, although paid less frequently, shall be evenly allocated to the calendar months with respect to which it is paid. Notwithstanding anything apparently to the contrary, in determining Average Compensation, there shall be taken into account the short term annual incentive compensation attributable to the thirty-six (36) calendar months preceding the date as of which the Average Compensation is determined or, if it would produce a greater Average Compensation, the short term annual incentive compensation attributable to the thirty-six (36) calendar months ending with the December 31 preceding the date as of which the Average Compensation is determined. 1.2.6. BENEFICIARY - a person designated by a Participant (or automatically by operation of this Plan Statement) to receive the Survivor Benefit in the event of the Participant's death under circumstances when such benefit is payable under Section 5. A person so designated shall not be considered a Beneficiary until the death of the Participant. 1.2.7. CAP - the tax-qualified defined contribution ("ss.401(k)") profit sharing plan known as the FIRST BANK SYSTEM, INC. CAPITAL ACCUMULATION PLAN, as the same is existing and may be amended from time to time. 1.2.8. CHANGE IN CONTROL - an event defined as a Change in Control in the form of nonqualified stock option agreement adopted by the Organization Committee of the Board of Directors under the "First Bank System, Inc. 1991 Stock Incentive Plan" or any comparable successor plan most recently before such event. FBS shall determine the date on which a Change in Control has occurred. 1.2.9. COMPENSATION - a dollar amount which is the annual amount of base salary and short term annual incentive compensation paid to the Participant for services rendered as an employee of the Employer. Compensation may decrease from time to time. (a) CAP INCOME. Compensation shall include amounts which the Participant would have received and would have been included as Compensation but for section 402(a)(8) of the Code. (b) CAFETERIA PLAN CONTRIBUTIONS. Compensation shall include amounts which the Participant would have received and which would have been included as Compensation but for section 125 of the Code. (c) DEFERRED COMPENSATION. Notwithstanding the foregoing, Compensation shall include amounts of base salary and short term annual incentive compensation which were deferred at the election of the Participant or otherwise under a nonqualified plan of deferred compensation at the time such amounts would have been paid but for such election to defer and not at the time actually received by the Participant. 1.2.10. EFFECTIVE DATE - January 1, 1992. 1.2.11. EMPLOYER - the Principal Sponsor and any business entity affiliated with the Principal Sponsor that employs persons who are designated for participation in this Plan. Unless the Organization Committee determines otherwise, no business entity shall be considered an Employer for any period of time prior to the date on which the business entity first became an Employer. 1.2.12. FBS-FIRST BANK SYSTEM, INC., a Delaware corporation. 1.2.13. NORMAL RETIREMENT AGE - a date determined as of a specified date: (a) for a Participant who is not yet age sixty-five (65) years as of the specified date, the last day of the calendar month in which the Participant will attain age sixty-five (65) years, or (b) for a Participant who is age sixty-five (65) years or older as of the specified date, the last day of the calendar month immediately preceding the date as of which the Normal Retirement Age is being determined. 1.2.14. ORGANIZATION COMMITTEE - the committee of that name constituted by the Board of Directors of the Principal Sponsor. 1.2.15. PARTICIPANT - an employee of an Employer who becomes a Participant in the Plan in accordance with the provisions of Section 2. An employee who has become a Participant shall be considered to continue as a Participant in the Plan until the date of the Participant's death or, if earlier, the date when the Participant is no longer employed by an Employer and upon which the Participant no longer has any SERP Benefit under the Plan (that is, the Participant has received a distribution of all of the Participant's SERP Benefit or the Participant's SERP Benefit has been forfeited). 1.2.16. PLAN - the nonqualified deferred compensation plan of the Employer established for the benefit of employees eligible to participate therein, as first set forth in this Plan Statement. (As used herein, "Plan" refers to the legal entity established by an Employer and not to the document pursuant to which the Plan is maintained. That document is referred to herein as the "Plan Statement.") The Plan shall be referred to as the "FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN." 1.2.17. PLAN STATEMENT - this document entitled "FIRST BANK SYSTEM, INC. NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN," as adopted by the Principal Sponsor effective as of January 1, 1992, as the same may be amended from time to time thereafter. 1.2.18. PRA - the tax-qualified defined benefit ("cash balance") pension plan known as the FIRST BANK SYSTEM, INC. PERSONAL RETIREMENT ACCOUNT, as the same is existing and amended from time to time. 1.2.19. PRINCIPAL SPONSOR - FIRST BANK SYSTEM, INC., a Delaware corporation. 1.2.20. PRIOR PLANS' OFFSET - a dollar amount equal to the product of the Participant's Projected Average Compensation multiplied by the factor for that Participant determined from Schedule II to this Plan Statement. The factor for the participant shall be determined by reference to the Participant's age at his or her most recent date of hire by the Employer. To the same extent that the Organization Committee determines under Section 1.2.11 of the Plan Statement that a business entity was an Employer prior to the date on which the business entity first became an Employer, the business entity shall be considered an Employer for the purposes of this paragraph. 1.2.21. PROJECTED AVERAGE COMPENSATION - a dollar amount which is the average of the Participant's Compensation or Projected Compensation or both for each of the three (3) calendar years ending with: (a) if the date as of which the Projected Average Compensation is determined is before the Participant's Normal Retirement Age, the calendar year in which the Participant would attain Normal Retirement Age, or (b) if the date as of which the Projected Average Compensation is determined is on or after the Participant's Normal Retirement Age, the Plan Year in which the Participant's SERP Benefit is determined. Projected Average Compensation may decrease from time to time. 1.2.22. PROJECTED COMPENSATION - a separate dollar amount determined for each Plan Year commencing after the date as of which Projected Compensation is determined, assuming: (a) the Participant continues to earn short-term incentive payments at the target levels, and (b) the annual rate of the Participant's Compensation as of the first day of the Plan Year in which it is determined increased at four percent (4%) per annum, compounded annually, on the first day of each successive Plan Year. Projected Compensation may decrease from time to time. 1.2.23. PROJECTED PIA - the dollar amount of annual old age Social Security benefit expected to be paid to the Participant at the Participant's Normal Retirement Age, assuming: (a) that the Participant has had and continues to have taxable wages at or above the taxable wage base for Social Security purposes, (b) that the maximum Social Security taxable wage base increases at the rate at which Projected Compensation is deemed to increase under this Plan Statement, (c) that the consumer price index increases at one percentage point less than the rate at which Projected Compensation is deemed to increase under this Plan Statement. 1.2.24. PROJECTED PRA ACCOUNT - a dollar amount equal to the Account balance the Participant would be expected to have under PRA at his or her Normal Retirement Age based on the following assumptions: (a) The initial account balance shall be the balance determined under PRA as of the last day of the Plan Year immediately preceding the date as of which the Projected PRA Account is determined (together with such amounts as would have been included in such balance if there were no limitations on benefits under section 415 of the Internal Revenue Code and no limitations on compensation under section 401(a)(17) of the Internal Revenue Code). (b) The Participant shall receive increases in recognized compensation at the rate Projected Compensation is deemed to increase under this Plan Statement. (c) Compensation credits under PRA shall be made under the terms of PRA as they exist on the last day of the Plan Year immediately preceding the date as of which the Projected PRA Account is determined. (d) Interest credits under PRA shall be made at an annual rate that is 3 percentage points greater than the rate at which Projected Compensation is deemed to increase under this Plan Statement. (e) Compensation credits and interest credits under PRA have been and shall be made as if there were no limitations on benefits under section 415 of the Internal Revenue Code and no limitations on compensation under section 401(a)(17) of the Internal Revenue Code. (f) Subject to the following, the Participant's initial account balance shall not include any amounts attributable to service with a business entity prior to the date the business entity first became an Employer. To the same extent that the Organization Committee determines under Section 1.2.11 of the Plan Statement that a business entity was an Employer prior to the date on which the business entity first became an Employer, amounts attributable to service with the business entity shall be included in the Participant's initial account balance. (g) Projected PRA Account may decrease from time to time. 1.2.25. PROJECTED PRA ANNUITY - a dollar amount equal to the Actuarial Equivalent amount of single life annuity payable at Normal Retirement Age which the Projected PRA Account will produce. 1.2.26. SERP BENEFIT - a single, lump sum, dollar amount which is equal to the Actuarial Equivalent present value of the Participant's Accrued SERP Benefit payable as a single life annuity commencing at the Participant's Normal Retirement Age. The SERP Benefit may decrease from time to time. The SERP Benefit may be paid in any of the optional forms of payment which are permitted under Section 4.1. 1.2.27. SERVICE - a measure of an employee's service with all Employers and all Affiliates (stated as a number of years) which is equal to the number of years of "Vesting Service" determined under the rules of PRA (or any similar successor plan) as those rules may exist at the time the Participant's Service is being determined. For this purpose, however, there shall be taken into account only years of continuous and full time service with the Employer which the Participant has completed from his or her most recent date of hire. Unless the Organization Committee determines otherwise, service with an employer prior to the date on which the employer first became an Employer shall not be taken into account for this purpose. Any determination by the Organization Committee under this Section 1.2.27 shall be independent of any determination by the Organization Committee under Section 1.2.11 of the Plan Statement. 1.2.28. SOCIAL SECURITY BENEFIT - the approximate monthly amount available for the benefit of the Participant at age sixty-five (65) years, (including amounts available for spouses but excluding amounts available for other dependents), as an old age or disability insurance benefit under the provisions of Title II of the Federal Social Security Act in effect on the date of the Participant's Termination of Employment (or his or her sixty-fifth birthday if the Termination of Employment is later than the sixty-fifth birthday) whether or not payment of such amount in delayed, suspended or forfeited because of failure to apply, accepting other work, or any other similar reason within the control of the Participant (and determined without any increases in cost of living, legislated changes or any other similar factors). For this purpose, the Participant's spouse, if any, shall be deemed to be the same age as the Participant. Unless the Participant shall have furnished verified proof of wages before the earlier of his or her Termination of Employment or death, he or she shall be deemed to have had taxable wages at or above the taxable wage base in all years prior to the year of his or her Termination of Employment or death. The determination by the Principal Sponsor of the Social Security Benefit shall be final and binding upon all parties interested in this Plan. 1.2.29. SURVIVOR BENEFIT - the lump sum benefit or single life annuity payable to the Beneficiary of a deceased Participant pursuant to Section 5.1. 1.2.30. TERMINATION OF EMPLOYMENT - a complete severance of an employee's employment relationship with the Principal Sponsor, all Employers and all Affiliates, if any, for any reason other than the employee's death. A transfer from employment with an Employer to employment with an Affiliate of an Employer shall not constitute a Termination of Employment. If an Employer who is an Affiliate ceases to be an Affiliate because of a sale of substantially all the stock or assets of an Employer, then Participants who are employed by that Employer and who cease to be employed by the Principal Sponsor or that Employer on account of the sale of substantially all the stock or assets of that Employer shall be deemed to have thereby had a Termination of Employment for the purpose of making distributions from this Plan. 1.3. RULES OF INTERPRETATION. An individual shall be considered to have attained a given age on the individual's birthday for that age (and not on the day before). The birthday of any individual born on a February 29 shall be deemed to be February 28 in any year that is not a leap year. Notwithstanding any other provision of this Plan Statement or any election or designation made under the Plan, any individual who feloniously and intentionally kills a Participant shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before such Participant. A final judgment of conviction of felonious and intentional killing is conclusive for the purposes of this Section. In the absence of a conviction of felonious and intentional killing, the Principal Sponsor shall determine whether the killing was felonious and intentional for the purposes of this Section. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine; and the words "hereof," "herein" or "hereunder" or other similar compounds of the word "here" shall mean and refer to the entire Plan Statement and not to any particular paragraph or Section of this Plan Statement unless the context clearly indicates to the contrary. The titles given to the various Sections of this Plan Statement are inserted for convenience of reference only and are not part of this Plan Statement, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. Any reference in this Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. This instrument has been executed and delivered in the State of Minnesota and has been drawn in conformity to the laws of that State and shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Minnesota. SECTION 2 ELIGIBILITY AND PARTICIPATION 2.1. GENERAL ELIGIBILITY RULE. The status of an employee as a Participant in this Plan shall be determined only as of Termination of Employment or death. Each employee who: (a) has not less than five (5) years of Service with FIRST BANK SYSTEM, INC. and its subsidiaries at Termination of Employment or death; and (b) was actively employed at Grade 18 or above for at least one year immediately prior to Termination of Employment or death; and (c) is a "highly compensated employee" as defined in Code section 414(q) at the time of Termination of Employment or death; and (d) was actively employed by an Employer on or after January 1, 1992, shall be a Participant in this Plan at his or her Termination of Employment or death (subject to Section 2.2 and all other rules of this Plan Statement). Notwithstanding the foregoing, the Chief Executive Officer of the Principal Sponsor may exclude any individual who would otherwise be Participant from being a Participant and such determination shall be effective if such person receives notice of such determination in writing before his or her Termination of Employment. 2.2. SPECIFIC EXCLUSION. Notwithstanding anything apparently to the contrary in this Plan or in any written communication, summary, resolution or document or oral communication, no individual shall be a Participant in this Plan, develop benefits under this Plan or be entitled to receive benefits under this Plan (either for himself or his or her survivors) unless such individual is a member of a select group of management or highly compensated employees (as that expression is used in ERISA). If a court of competent jurisdiction, any representative of the U.S. Department of Labor or any other governmental, regulatory or similar body makes any direct or indirect, formal or informal, determination that an individual is not a member of a select group of management or highly compensated employees (as that expression is used in ERISA), such individual shall not be (and shall not have ever been) a Participant in this Plan at any time. If any person not so defined has been erroneously treated as a Participant in this Plan, upon discovery of such error such person's erroneous participation shall immediately terminate ab initio and upon demand such person shall be obligated to reimburse the Principal Sponsor for all amounts erroneously paid to him or her. SECTION 3 PARTICIPANT'S BENEFIT 3.1. SERP BENEFIT. Upon Termination of Employment, the Participant shall receive a SERP Benefit determined as of the date of the Termination of Employment. The SERP Benefit shall be paid in a single lump sum unless an election of an optional form of payment is in effect under Section 4.1. Payment shall be made or commenced as soon as may be practicable on or after the fifteenth day of the second calendar month following Termination of Employment. Such payment shall be in full and complete discharge of all benefits payable to, or with respect to, the Participant under this Agreement including, but not limited to, any Survivor Benefit to which his or her Beneficiary might otherwise have been entitled. The consent of a spouse or Beneficiary shall not be required before making the single lump sum payment or optional form of payment herein described. 3.2. SUSPENSION OF BENEFITS. The SERP Benefit shall not be paid during employment, reemployment or continued employment under rules adopted by the Principal Sponsor. Until such rules are adopted, the suspension of benefits rules of PRA shall apply. 3.3. CHANGE IN CONTROL DISTRIBUTIONS. 3.3.1. ACCELERATED DETERMINATION OF PARTICIPANT STATUS. Notwithstanding anything apparently to the contrary in this Plan Statement, upon the occurrence of a Change in Control all employees who would be considered Participants if they had a Termination of Employment on the date of the Change in Control shall be considered Participants. This determination shall be made without regard to whether such employees have five (5) or more years of Service with FIRST BANK SYSTEM, INC. and its subsidiaries at the date of such Change in Control. 3.3.2. ACCELERATED PAYMENT UPON REQUEST. A Participant who has not yet commenced to receive payments of the SERP Benefit may receive a distribution of his or her entire SERP Benefit (after reduction for the forfeiture described in Section 3.4.3) if a Change in Control has occurred. 3.3.3. FORFEITURES. Upon the approval of a Change in Control distribution, there shall be irrevocably forfeited from the SERP Benefit of the Participant an amount equal to five percent (5%) of the SERP Benefit. A Participant receiving this distribution of the SERP Benefit on account of a Change in Control shall not thereafter ever be a Participant in the Plan again. 3.4. OTHER ACCELERATED DISTRIBUTIONS. 3.4.1. WHEN AVAILABLE. At any time following the Participant's Termination of Employment, the Participant or the Beneficiary of a deceased Participant who has elected an optional form of payment under Section 4.1 may elect to receive an accelerated distribution of the SERP Benefit in a lump sum payment determined under this Section 3.4 payable sixty (60) days after giving the Principal Sponsor written notice of the election on a form furnished by and filed with the Principal Sponsor. In the event of the severe financial hardship of a Participant following Termination of Employment or of a Beneficiary, the Participant or Beneficiary may elect to receive an accelerated distribution of part of the SERP benefit in a lump sum payment determined under this Section 3.4. The Principal Sponsor shall determine whether a severe financial hardship exists in its sole discretion, in good faith, and on a uniform, nondiscriminatory and reasonable basis. 3.4.2. AMOUNT. Subject to penalties under Section 3.4.3, the amount of any accelerated lump sum distribution shall be determined as follows: (a) Before the commencement of payment of the SERP Benefit, the lump sum payment to a Participant shall equal the lump sum value of the Participant's Accrued SERP Benefit. (b) After the commencement of payment of the SERP Benefit, the lump sum payment to a Participant shall equal the difference between (i) minus (ii) below, determined as of the date for the commencement of SERP Benefit payments (the "Commencement Date") and accumulated to the date of the lump sum payment using the same interest rate that is used in calculating the amounts under (i) and (ii): (i) The lump sum value of the Participant's Accrued SERP Benefit determined as of the Participant's Commencement Date, (ii) The lump sum value of the SERP Benefit payments previously paid to the Participant discounted to the Participant's Commencement Date. The lump sum value of the SERP Benefit payments previously paid to the Participant shall be calculated based on the monthly payments which would have been made if the Participant had elected to receive the SERP Benefit as a single life annuity, irrespective of the optional form of payment of the SERP Benefit actually elected by the Participant. (c) The lump sum payment to a Beneficiary of a deceased Participant shall be determined in a manner similar to that used for a Participant, except that the lump sum payment shall only reflect the value of the remaining payments of the SERP Benefit which would be made to the Beneficiary under the optional form of payment elected by the Participant assuming that the Beneficiary dies upon reaching his or her original life expectancy determined as of the Participant's Commencement Date. (d) For an accelerated distribution to a Participant or Beneficiary on account of a severe financial hardship, the lump sum payment shall not exceed the amount necessary to relieve the hardship, and subsequent payments of the SERP Benefit shall be reduced according to the ratio of (i) to (ii) below: (i) The amount of the hardship distribution paid to the Participant or Beneficiary, (ii) The entire lump sum payment which the Participant or Beneficiary could have elected to receive on the date of the hardship distribution. For example, if the hardship distribution represents forty percent (40%) of the entire lump sum distribution which could have been received, subsequent payments to the Participant or Beneficiary will each be reduced by forty percent (40%). (e) All calculations under this Section 3.4. shall be based on the tables, factors (including interest rate), and assumptions that are set forth in Appendix A to this Plan Statement for determining Actuarially Equivalent benefits. (f) All calculations under this Section 3.4 shall be made by the Principal Sponsor, and its determinations with respect to accelerated distributions shall be final and binding on all parties. 3.4.3. FORFEITURES. Any lump sum payment under this Section 3.4, except any hardship distribution, shall be reduced by a penalty equal to ten percent (10%) of such payment which shall be forfeited to the Principal Sponsor; provided, however, that if any such payment is made within 24 months after a Change in Control has occurred, the penalty shall be equal to five percent (5%). Notwithstanding any other provisions of this Plan, no penalty shall apply if the Principal Sponsor determines, based on the advice of counsel or a final determination by the Internal Revenue Service or any court of competent jurisdiction, that by reason of the elective provisions of this Section 3.4, any Participant or Beneficiary has recognized or will recognize gross income for federal income tax purposes under this Plan in advance of payment to him or her of the SERP Benefit. The Principal Sponsor may also reduce or eliminate the penalty if it determines that this action will not cause any Participant or Beneficiary to recognize gross income for federal income tax purposes under this Plan in advance of payment of the SERP Benefit. 3.5. EFFECT ON SERVICE. If a Participant receives a lump sum distribution or commences to receive any optional form of payment of the Participant's SERP Benefit, the Plan shall thereafter disregard the Participant's Service and the Participant's years of continuous and full-time service used in determining the SERP Benefit with respect to which the Participant received or commenced to receive such distribution. SECTION 4 FORM OF PAYMENT 4.1. OPTIONAL FORMS OF PAYMENT. An employee who has four (4) or more years of Service with FIRST BANK SYSTEM, INC., is actively employed at Grade 18 or above, and is a "highly compensated employee" as defined in Code section 414(q) may elect at any time more than 12 months preceding Termination of Employment to have the SERP Benefit paid in monthly payments as a single life annuity, 50% or 100% joint and survivor annuity, or single life annuity with 10 or 15 year certain payments. All optional forms of payment shall have the same Actuarial Equivalent present value as the lump sum payment. An election of an optional form of payment must be made by the Participant in writing on a form furnished by and filed with the Principal Sponsor and may be changed at any time more than 12 months preceding Termination of Employment. Any election which is not timely made will be disregarded. Notwithstanding such an election, an optional form of payment of the SERP Benefit (other than a lump sum payment) will only be made to a Participant who has a Termination of Employment (A) after attaining age 65 or (B) after attaining age 55, when the sum of the Participant's age and years of continuous and full-time service with the Employer equals or exceeds 65. 4.2. PAYMENTS IN CASE OF INCOMPETENCY OR DISABILITY. In case of legal incompetency or disability, (including minority), of a person entitled to receive any payment under this Plan, payment may be made, if the Principal Sponsor has been advised of the existence of such condition: (a) to the duly appointed guardian, conservator or other legal representative of such incompetent or disabled person; or (b) to a person or institution entrusted with the care or maintenance of the incompetent or disabled person, provided such person or institution has satisfied the Principal Sponsor that the payment will be used for the best interest and assist in the care of such disabled or incompetent person or, provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such disabled or incompetent person. Any payment made in accordance with this Section shall constitute a complete discharge of any liability or obligation of this Plan, the Principal Sponsor and all Employers therefor. 4.3. SMALL BENEFITS. Notwithstanding any other provision of this Plan Statement to the contrary, the Principal Sponsor, in its discretion, may pay any benefit which is payable under the Plan to a Participant or Beneficiary in a lump sum payment if the lump sum amount which is payable is less than $50,000. SECTION 5 DEATH BENEFITS 5.1. DEATH BENEFITS. 5.1.1. DEATH BEFORE SERP BENEFIT COMMENCEMENT. Upon the death of a Participant who at his or her death had not yet commenced to receive payment of the SERP Benefit under the Plan, there shall be paid to the Participant's Beneficiary the single lump sum which the Participant would have received under Section 3.1 if the Participant had not died, but had instead had a Termination of Employment on the date of his or her death; provided, however, that an employee who is eligible to make an election under Section 4.1 may elect at any time prior to his or her death to have the death benefit which is payable upon his or her death before commencement of payment of the SERP Benefit paid as a single life annuity for the life of the Beneficiary. Such single life annuity shall have the same Actuarial Equivalent present value as the lump sum payment which would otherwise be made to the Beneficiary. An election to have the death benefit paid as a single life annuity must be made by the employee eligible to make such an election in writing on a form furnished by and filed with the Principal Sponsor and may be changed at any time during such employee's lifetime before commencement of payment of the SERP Benefit. Payment to the Beneficiary shall be made or commenced as soon as may be practicable on or after the fifteenth day of the second calendar month after the death of the Participant. 5.1.2. DEATH AFTER SERP BENEFIT COMMENCEMENT. If payment to a Participant of the SERP Benefit has been made in a lump sum or commenced as a single life annuity, no death benefit will be payable upon the death of the Participant. If payment to a Participant of the SERP Benefit has commenced as a 50% or 100% joint and survivor annuity or as a single life annuity with 10 or 15 year certain payments, payments will be made following the death of the Participant only in accordance with the terms of the optional form of payment of the SERP Benefit which was elected by the Participant. 5.2. DESIGNATION OF BENEFICIARIES. 5.2.1. RIGHT TO DESIGNATE. Each employee who is eligible to make an election under Section 4.1 may designate, upon forms to be furnished by and filed with the Principal Sponsor, one or more primary Beneficiaries or alternate Beneficiaries to receive all or a specified part of such employee's Survivor Benefit in the event of his or her death. Such employee may change or revoke any such designation from time to time before commencement of payment of the SERP Benefit without notice to or consent from any Beneficiary or spouse. No such designation, change or revocation shall be effective unless executed by the employee eligible to make such designation and received by the Principal Sponsor during such employee's lifetime and prior to commencement of payment of the SERP Benefit. 5.2.2. FAILURE OF DESIGNATION. If a Participant: (a) fails to designate a Beneficiary, (b) designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or (c) designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, such Participant's Survivor Benefit, or the part thereof as to which such Participant's designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant: Participant's surviving spouse Participant's surviving issue per stirpes and not per capita Participant's surviving parents Participant's surviving brothers and sisters Representative of Participant's estate. 5.2.3. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled to a distribution of all or a portion of a deceased Participant's Survivor Benefit may disclaim an interest therein subject to the following requirements. To be eligible to disclaim, a Beneficiary must be a natural person, must not have received a distribution of all or any portion of the lump sum death benefit at the time such disclaimer is executed and delivered, and must have attained at least age twenty-one (21) years as of the date of the Participant's death. Any disclaimer must be in writing and must be executed personally by the Beneficiary before a notary public. A disclaimer shall state that the Beneficiary's entire interest in the undistributed Survivor Benefit is disclaimed or shall specify what portion thereof is disclaimed. To be effective, duplicate original executed copies of the disclaimer must be both executed and actually delivered to the Principal Sponsor after the date of the Participant's death but not later than one hundred eighty (180) days after the date of the Participant's death. A disclaimer shall be irrevocable when delivered to the Principal Sponsor. A disclaimer shall be considered to be delivered to the Principal Sponsor only when actually received by the Principal Sponsor. The Principal Sponsor shall be the sole judge of the content, interpretation and validity of a purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary shall be considered not to have survived the Participant as to the interest disclaimed. A disclaimer by a Beneficiary shall not be considered to be a transfer of an interest in violation of the provisions of Section 6 and shall not be considered to be an assignment or alienation of benefits in violation of federal law prohibiting the assignment or alienation of benefits under this Plan. No other form of attempted disclaimer shall be recognized by the Principal Sponsor. 5.2.4. DEFINITIONS. When used herein and, unless the Participant has otherwise specified in the Participant's Beneficiary designation, when used in a Beneficiary designation, "issue" means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their descendants but not including illegitimate descendants and their descendants; "child" means an issue of the first generation; "per stirpes" means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and "survive" and "surviving" mean living after the death of the Participant. 5.2.5. SPECIAL RULES. Unless the Participant has otherwise specified in the Participant's Beneficiary designation, the following rules shall apply: (a) If there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant. (b) The automatic Beneficiaries specified in Section 5.2.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant's death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary's estate. (c) If the Participant designates as a Beneficiary the person who is the Participant's spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation. (The foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Principal Sponsor after the date of the legal termination of the marriage between the Participant and such former spouse, and during the Participant's lifetime.) (d) Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant's death. (e) Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant's death. A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the Participant's legal residence. The Principal Sponsor shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation. 5.2.6. NO SPOUSAL RIGHTS. No spouse or surviving spouse of a Participant and no person designated to be a Beneficiary shall have any rights or interest in the benefits accumulated under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant. 5.3. DEATH PRIOR TO FULL DISTRIBUTION. If, at the death of the Participant, any payment to the Participant was due or otherwise pending but not actually paid, the amount of such payment shall be included in the Survivor Benefit which are payable to the Beneficiary (and shall not be paid to the Participant's estate). SECTION 6 FUNDING OF PLAN 6.1. UNFUNDED AGREEMENT. The obligation of the Employers to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Employers to make such payments. The Participant shall have no lien, prior claim or other security interest in any property of any Employer. If a fund is established by the Employers in connection with this Plan, the property therein shall remain the sole and exclusive property of the Employers. The Employers will pay the cost of this Plan out of their general assets. If the Principal Sponsor elects to finance all or a portion of its costs in connection with this Plan through the purchase of life insurance or other similar investments, the Participant agrees, as a condition of participation in this Plan, to cooperate with the Principal Sponsor in the purchase of such investment to any extent reasonably required by the Principal Sponsor and relinquishes any claim he or she may have either for himself or herself or any beneficiary to the proceeds of any such investment or any other rights or interests in such investment. If a Participant fails or refuses to cooperate, then notwithstanding any other provision of this Plan Statement (including, without limiting the generality of the foregoing, Section 4) the Principal Sponsor shall immediately and irrevocably terminate and forfeit the Participant's entitlement to benefits under the Plan. 6.2. SPENDTHRIFT PROVISION. No Participant or Beneficiary shall have any interest under this Plan which can be transferred nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Employers, nor shall the Principal Sponsor recognize any assignment thereof, either in whole or in part, nor shall any benefit under this Plan be subject to attachment, garnishment, execution following judgment or other legal process while in the possession or control of the Employers. The power to designate Beneficiaries to receive the Survivor Benefit of a Participant in the event of such Participant's death shall not permit or be construed to permit such power or right to be exercised by the Participant so as thereby to anticipate, pledge, mortgage or encumber such Participant's SERP Benefit or any part thereof, and any attempt of a Participant so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Principal Sponsor. SECTION 7 AMENDMENT AND TERMINATION The Principal Sponsor reserves the power to amend the Plan Statement or terminate the Plan prior to a Change in Control. No such amendment of the Plan Statement or termination of the Plan, however, shall reduce a Participant's SERP Benefit earned as of the date of such amendment unless the Participant so affected consents in writing to the amendment. After a Change in Control, the Plan cannot be amended or terminated (as applied to Participants who are Participants on the date of the Change in Control) unless: (a) all SERP Benefits of all Participants as of the date of the Change in Control have been paid, or (b) eighty percent (80%) of all the Participants as of the date of the Change in Control give written consent to such amendment or termination. Notwithstanding the rules of Section 2, for the purposes of the rules of this Section 7, each employee who would be a Participant at the time of the Change in Control if he or she: (i) had a Termination of Employment coincident with the Change in Control, and (ii) had not less than five (5) years of Service with FIRST BANK SYSTEM, INC. and its subsidiaries at the time of the Change in Control, shall be considered a Participant. No modification of the terms of this Plan Statement shall be effective unless it is in writing and signed on behalf of the Principal Sponsor by a person authorized to execute such writing. No oral representation concerning the interpretation or effect of this Plan Statement shall be effective to amend the Plan Statement. SECTION 8 DETERMINATIONS - RULES AND REGULATIONS 8.1. DETERMINATIONS. The Principal Sponsor shall make such determinations as may be required from time to time in the administration of the Plan. The Principal Sponsor shall have the discretionary authority and responsibility to interpret and construe the Plan Statement and to determine all factual and legal questions under the Plan, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests. Each interested party may act and rely upon all information reported to them hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary. 8.2. RULES AND REGULATIONS. Any rule not in conflict or at variance with the provisions hereof may be adopted by the Principal Sponsor. The Principal Sponsor shall adopt rules regarding the computation of continuous and full time service with the Employer including, without limiting the generality of the foregoing, rules regarding the exclusion of periods of employment with respect to which benefits may have been previously paid under this Plan, the exclusion of periods of employment at levels or in positions not covered by this Plan, the computation of continuous and full time service upon the reemployment of a former employee and the exclusion of periods of employment when disabled (under the Employer's separate plan of long term disability benefits or otherwise). Such rules shall also prescribe the effect of loss of eligibility, deemed Termination of Employment upon loss of eligibility, the computation of continuous and full time service upon reemployment and the method for computing the Projected PRA Account when the period benefits accrued under PRA does not match the period of continuous and full time service under this Plan. 8.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written notices to be made or consents to be given by the Principal Sponsor pursuant to any provision of this Plan Statement may be signed in the name of the Principal Sponsor by any officer who has been authorized to make such certification or to give such notices or consents. 8.4. CLAIMS PROCEDURE. The claims procedure set forth in this Section 8.4 shall be the exclusive procedure for the disposition of claims for benefits arising under the Plan until such time as a Change in Control occurs. 8.4.1. ORIGINAL CLAIM. Any employee, former employee or beneficiary of such employee or former employee may, if he or she so desires, file with the Principal Sponsor a written claim for benefits under the Plan. Within ninety (90) days after the filing of such a claim, the Principal Sponsor shall notify the claimant in writing whether the claim is upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred eighty days from the date the claim was filed) to reach a decision on the claim. If the claim is denied in whole or in part, the Principal Sponsor shall state in writing: (a) the specific reasons for the denial; (b) the specific references to the pertinent provisions of this Plan Statement on which the denial is based; (c) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) an explanation of the claims review procedure set forth in this section. 8.4.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of notice that the claim has been denied in whole or in part, the claimant may file with the Principal Sponsor a written request for a review and may, in conjunction therewith, submit written issues and comments. Within sixty (60) days after the filing of such a request for review, the Principal Sponsor shall notify the claimant in writing whether, upon review, the claim was upheld or denied in whole or in part or shall furnish the claimant a written notice describing specific special circumstances requiring a specified amount of additional time (but not more than one hundred twenty days from the date the request for review was filed) to reach a decision on the request for review. 8.4.3. GENERAL RULES. (a) No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Principal Sponsor may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Principal Sponsor upon request. (b) All decisions on claims and on requests for a review of denied claims shall be made by the Principal Sponsor. (c) the Principal Sponsor may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. (d) A claimant may be represented by a lawyer or other representative (at the claimant's own expense), but the Principal Sponsor reserves the right to require the claimant to furnish written authorization. A claimant's representative shall be entitled to copies of all notices given to the claimant. (e) The decision of the Principal Sponsor on a claim and on a request for a review of a denied claim shall be served on the claimant in writing. If a decision or notice is not received by a claimant within the time specified, the claim or request for a review of a denied claim shall be deemed to have been denied. (f) Prior to filing a claim or a request for a review of a denied claim, the claimant or his or her representative shall have a reasonable opportunity to review a copy of this Plan Statement and all other pertinent documents in the possession of the Principal Sponsor. 8.5. INFORMATION FURNISHED BY PARTICIPANTS. The Principal Sponsor shall not be liable or responsible for any error in the computation of the SERP Benefit of a Participant resulting from any misstatement of fact made by the Participant, directly or indirectly, to the Principal Sponsor, and used by it in determining the Participant's SERP Benefit. The Principal Sponsor shall not be obligated or required to increase the SERP Benefit of such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the SERP Benefit of any Participant which are overstated by reason of any such misstatement shall be reduced to the amount appropriate in view of the truth. SECTION 9 PLAN ADMINISTRATION 9.1. PRINCIPAL SPONSOR. 9.1.1. OFFICERS. Except as hereinafter provided, functions generally assigned to the Principal Sponsor shall be discharged by its officers or delegated and allocated as provided herein. 9.1.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter provided, the Chief Executive Officer of the Principal Sponsor may delegate or redelegate and allocate and reallocate to one or more persons or to a committee of persons jointly or severally, and whether or not such persons are directors, officers or employees, such functions assigned to the Principal Sponsor generally hereunder as the Chief Executive Officer may from time to time deem advisable. 9.1.3. BOARD OF DIRECTORS. Notwithstanding the foregoing, the Organization Committee of the Board of Directors of the Principal Sponsor shall have the exclusive authority, which may not be delegated, to act for the Principal Sponsor to amend this Plan Statement, to terminate this Plan, and to determine eligibility to participate in the Plan under Section 2. 9.2. CONFLICT OF INTEREST. If any officer or employee of the Principal Sponsor or any Employer, or any member of the Organization Committee of the Board of Directors of the Principal Sponsor or any Employer to whom authority has been delegated or redelegated hereunder shall also be a Participant in the Plan, such Participant shall have no authority as such officer, employee or member with respect to any matter specially affecting such Participant's individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to the other officers, employees or members as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant's individual capacity in connection with any such matter. 9.3. ADMINISTRATOR. FIRST BANK SYSTEM, INC. shall be the administrator for purposes of section 3(16)(A) of the Employee Retirement Income Security Act of 1974. 9.4. SERVICE OF PROCESS. In the absence of any designation to the contrary by the Principal Sponsor, the Secretary of FIRST BANK SYSTEM, INC. is designated as the appropriate and exclusive agent for the receipt of service of process directed to the Plan in any legal proceeding, including arbitration, involving the Plan. 9.5. IRC AND ERISA STATUS. This Plan is intended to be a nonqualified deferred compensation arrangement. The rules of section 401(a) et. seq. of the Code shall not apply to this Plan. This Plan is adopted with the understanding that it is in part an unfunded excess benefit plan within the meaning of section 3(36) ERISA and is in part an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in sections 201(2), 301(3) and 401(a)(1) of ERISA. Each provision hereof shall be interpreted and administered accordingly. This Plan shall not alter, enlarge or diminish any person's employment rights or obligations or rights or obligations under PRA or any other plan. It is specifically contemplated that PRA and the Excess Plan will, from time to time, be amended and possibly terminated. All such amendments and termination shall be given effect under this Plan (it being expressly intended that this Plan shall not lock in the benefit structures of PRA and the Excess Plan as they exist at the adoption of this Plan or upon the commencement of participation, or commencement of benefits by any Participant). This Plan will not provide any excess benefits with respect to any profit sharing plan, stock bonus plan, employee stock ownership plan or PAYSOP. This Plan shall be construed to prevent the duplication of benefits provided under any other plan or arrangement, whether qualified or nonqualified, funded or unfunded, to the extent that such other benefits are provided directly or indirectly by an Employer. SECTION 10 DISCLAIMERS 10.1. TERM OF EMPLOYMENT. Neither the terms of this Plan Statement nor the benefits hereunder nor the continuance thereof shall be a term of the employment of any employee. The Principal Sponsor and the Employers shall not be obliged to continue the Plan. The terms of this Plan Statement shall not give any employee the right to be retained in the employment of any Employer. 10.2. SOURCE OF PAYMENT. Neither the Principal Sponsor, any Employer nor any of its officers nor any member of their Boards of Directors in any way secure or guarantee the payment of any benefit or amount which may become due and payable hereunder to any Participant or to any Beneficiary or to any creditor of a Participant or a Beneficiary. Each Participant, Beneficiary or other person entitled at any time to payments hereunder shall look solely to the assets of the Employers for such payments or to the benefits distributed to any Participant or Beneficiary, as the case may be, for such payments. In each case where benefits shall have been distributed to a former Participant or a Beneficiary or to the person or any one of a group of persons entitled jointly to the receipt thereof and which purports to cover in full the benefit hereunder, such former Participant or Beneficiary, or such person or persons, as the case may be, shall have no further right or interest in the other assets of the Employers. Neither the Employers nor any of their officers nor any member of their Boards of Directors shall be under any liability or responsibility for failure to effect any of the objectives or purposes of the Plan by reason of the insolvency of any of the Employers. 10.3. DELEGATION. The Employers and their officers and the members of their Boards of Directors shall not be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of this Plan Statement or pursuant to procedures set forth in this Plan Statement. SCHEDULE I PARTICIPATING EMPLOYERS Effective as of January 1, 1995
NAME EMPLOYER ID NUMBER Boulevard Bank National Association 36-1521230 Boulevard Technical Services, Inc., Chicago, IL 36-3610403 Colorado Capital Advisors, Inc., Denver, CO 84-1072892 Colorado National Bank, Denver, CO 84-0165025 Colorado National Bank Aspen, Aspen, CO 84-0671596 Colorado National Bankshares, Inc., Denver, CO 84-0571505 Colorado National Leasing, Inc., Denver, CO 84-0636453 Colorado National Service Corporation, Denver, CO 84-1041820 FBS Ag. Credit, Inc., Englewood, CO 84-0818505 FBS Business Finance Corporation, Minneapolis, MN 41-0832663 FBS Card Services, Inc., Minneapolis, MN 41-1558798 FBS Information Services Corporation, St. Paul, MN 41-0880291 FBS Investment Services, Inc., Denver, CO 84-1019337 FBS Mortgage Corporation, Minneapolis, MN 58-1025135 First Bank (N.A.), Milwaukee, WI 39-0152428 First Bank Montana, National Association, Billings, MT 81-0166295 First Bank National Association, Minneapolis, MN 41-0256895 First Bank of North Dakota, National Association, Fargo, ND 45-0164355 First Bank of South Dakota, National Association, Sioux Falls, SD 46-0168855 First Bank System, Inc., Minneapolis, MN 41-0255900 First National Bank of East Grand Forks, East Grand Forks, MN 41-0417860 First System Agencies,Inc., Minneapolis, MN 41-0831328 First System Services, Inc., Minneapolis, MN 41-0257030 First Trust National Association, St. Paul, MN 41-0257700 First Trust Company of Montana, National Association, Billings, MT 81-0259015 First Trust Company of North Dakota, Fargo, ND 45-0342631 First Trust of California, National Association, San Francisco, CA 94-3160100 First Trust of New York, National Association, New York, NY 13-3781471 First Trust Washington, Seattle, WA 91-1587893 Republic Acceptance Corporation, Minneapolis, MN 41-1753837 Rocky Mountain BankCard System, Inc., Denver, CO 84-1010148
SCHEDULE II PRIOR PLANS' OFFSET AGE WHEN FIRST EMPLOYED FACTOR 36 0.45% 37 0.94% 38 1.47% 39 2.06% 40 2.71% 41 3.41% 42 4.18% 43 5.01% 44 5.92% 45 6.91% 46 7.98% 47 9.14% 48 10.40% 49 11.76% 50 13.23% 51 14.82% 52 16.53% 53 18.38% 54 20.37% 55 22.51% 56 24.82% 57 27.30% 58 29.97% 59 32.83% 60 35.91% 61 39.21% 62 42.76% 63 46.56% 64 50.63% 65 55.00% APPENDIX A ACTUARIALLY EQUIVALENT BENEFITS Section 1. GENERAL RULES. The point of reference for determining the Actuarially Equivalent single lump sum benefit is the monthly benefit amount expressed in the single life annuity form. When, under the terms of the Plan, the monthly amount of the SERP Benefit or other benefit has been determined in the single life annuity form, reference to the following factors and tables will determine the Actuarially Equivalent single lump sum benefit: INTEREST: The interest rate used by the Pension Benefit Guaranty Corporation to value immediate annuities (for participants who are age 65 years) in the event of plan terminations occurring on the first day of the Plan Year in which occurs the date as of which the Actuarially Equivalent single lump sum benefit is being determined MORTALITY: 1971 Group Annuity Mortality Table, assuming all Participants are male. The single life annuity benefit to be converted to the single lump sum benefit shall be the benefit commencing on the first day of the calendar month following the attainment of age sixty-five (65) years or if later the first day of the calendar month after Termination of Employment EX-11 5 EXHIBIT 11 COMPUTATION OF PRIMARY AND FULLY DILUTED NET INCOME PER COMMON SHARE
THREE MONTHS ENDED MARCH 31 (Dollars in millions, except per share data) 1995 1994 PRIMARY: Average shares outstanding 133,797,144 130,689,547 Net effect of the assumed purchase of stock under the stock option and stock purchase plans--based on the treasury stock method using average market price 1,748,589 1,660,432 135,545,733 132,349,979 Income from continuing operations $133.8 $111.9 Preferred dividends (1.9) (5.9) Income from continuing operations applicable to common equity $131.9 $106.0 Income from continuing operations per common share $0.97 $0.80 Loss from discontinued operations -- $(1.2) Loss from discontinued operations per common share -- $(0.01) Net income $133.8 $110.7 Preferred dividends (1.9) (5.9) Net income applicable to common equity $131.9 $104.8 Net income per common share $0.97 $0.79 FULLY DILUTED: * Average shares outstanding 133,797,144 130,689,547 Net effect of the assumed purchase of stock under the stock option and stock purchase plans--based on the treasury stock method using average market price or period-end market price, whichever is higher 2,151,338 1,791,484 Assumed conversion of Series 1991A Preferred Stock 3,655,684 3,655,684 139,604,166 136,136,715 Income from continuing operations $133.8 $111.9 Preferred dividends, excluding 1991A Preferred Stock -- (4.0) Income from continuing operations applicable to common equity $133.8 $107.9 Income from continuing operations per common share $0.96 $0.79 Loss from discontinued operations -- $(1.2) Loss from discontinued operations per common share -- $(0.01) Net income $133.8 $110.7 Preferred dividends, excluding 1991A Preferred Stock -- (4.0) Net income applicable to common equity $133.8 $106.7 Net income per common share $0.96 $0.78
*This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 17 of APB Opinion No. 15 because it results in dilution of less than 3%. EX-12 6 EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
THREE MONTHS ENDED MARCH 31 (Dollars in Millions) 1995 EARNINGS 1. Net income $133.8 2. Applicable income taxes 78.8 3. Net income before taxes (1 + 2) $212.6 4. Fixed charges: a. Interest expense excluding interest on deposits $83.9 b. Portion of rents representative of interest and amortization of debt expense 6.3 c. Fixed charges excluding interest on deposits (4a + 4b) 90.2 d. Interest on deposits 178.4 e. Fixed charges including interest on deposits (4c + 4d) $268.6 5. Amortization of interest capitalized $ 1.2 6. Earnings excluding interest on deposits (3 + 4c + 5) 304.0 7. Earnings including interest on deposits (3 + 4e + 5) 482.4 8. Fixed charges excluding interest on deposits (4c) 90.2 9. Fixed charges including interest on deposits (4e) 268.6 RATIO OF EARNINGS TO FIXED CHARGES 10. Excluding interest on deposits (line 6/ line 8) 3.37 11. Including interest on deposits (line 7/ line 9) 1.80
EX-27 7
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST BANK SYSTEM, INC. MARCH 31, 1995, 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 1,598,000 0 253,000 90,000 3,535,000 0 0 25,215,000 470,400 32,712,000 23,477,000 2,929,000 818,000 2,542,000 169,000 0 106,000 2,482,000 32,712,000 547,200 69,300 9,100 625,600 178,400 262,300 363,300 26,000 0 304,300 212,600 133,800 0 0 133,800 0.97 0.96 5.05 148,000 34,400 100 0 474,700 51,700 19,600 470,400 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----